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PAC queries Duchy of Cornwall tax breaks

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16th Jul 2013
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The Prince of Wales’ tax arrangements were the subject of scrutiny by the Public Accounts Committee (PAC) this week.

The prince's private secretary William Nye, alongside Duchy of Cornwall finance director Keith Willis and Treasury officer of accounts Paula Diggle, appeared before MPs to answer why the prince does not pay any corporation or capital gains tax on his estate.

The prince voluntarily paid £5m in tax on his £18m income from the Duchy in 2011; a claimed rate of 50% after expenses.

The entire Duchy estate is worth more than £750m. The prince paid £4m in income tax and VAT on the £19m he received from the estate in 2012.

Income from the Duchy pays for the public duties of Prince Charles, his wife and children; otherwise these costs would be met by the taxpayer, Nye said.

The prince was targeted in December 2012 by tax campaigners Republic, who wrote to the PAC and HMRC asking them to look at the Duchy’s tax affairs.

New legal arguments were set off by an information rights tribunal  that ruled in 2011 that the Duchy was a separate public authority to the Prince of Wales under the Environmental Information Regulations.

Because of this decision, the PAC took the view that it is liable to pay corporation tax.

Committee chair Margaret Hodge said she did not understand how the Duchy could not be considered a corporation: “It has all the features of a corporation, how can you say it’s not? I want to understand,” she told Nye.

“I’m not a tax expert,” Nye answered, “But it’s an office running the administration on behalf of the duchy of Cornwall. It’s not a corporation.”

The PAC called on comptroller and auditor general Amyas Morse, the first chartered accountant to hold his role, to give his view on what a corporation is.

“I’m pretty nervous about what you’re leading up to with this,” he quipped, fostering a few laughs.

“It’s not as simple as being registered with Companies House. There are a number of characteristics which are tests of case law which have to be looked at. It could take years.

“It’s true that if you register at Companies House you are a corporation, but it’s not necessary that if you haven’t, then you’re definitely not.”

Despite being presented with a set of the duchy’s accounts for 2011/12, the PAC determined that they “don’t give the whole story” and appeared dissatisfied with the explanation.

The duchy has been inherited by successive Dukes of Cornwall since the 14th century and was established to provide a private income for the heir to the throne in 1937, in case he should not succeed.

Because of this, the estate does not pay CGT as it does not have access to capital gains, which will be reinvested for future dukes.

“The duchy is a legal entity, can enter into contracts, has brands, can employ people, has an auditor and an audit committee, a CEO of sorts. You are really bodging around, for tax purposes it’s not a corporation but it is - wouldn’t it be better if it pays tax as a corporation instead of some medieval anomaly that’s moved into the 21st century?” Austin Mitchell demanded.

“We’re a bit sensitive to medieval feudal power and plundering the public purse, having interviewed the BBC last week,” another PAC member jokingly added.

Willis hit back: “Parliament has not set it up as a corporation, it is run as a private estate not as a public body. The Duke of Cornwall is owner of its assets and, if I can correct you on one point, it does not own the brand Duchy Originals, that is entirely separate.

“The duchy produces yearly accounts, I’m told accounts you have now are about twice as long, and the prince and choses to produce an annual review. It’s right that he has his freedom to use his private income however he likes, however he chooses to uses it for official duties

“This is about him paying his tax bill. Our finance department and HMRC look at this yearly and carefully and make sure they are content with the amount of tax the prince is paying.”

Hodge said his taxation status was “peculiar” and that given his status he should be more transparent about it for the public’s sake.

Prince Charles pays tax voluntarily because he is not required to do so by law, as Diggle explained: “The monarch and prince cannot be in business and receive income in their own right, they need state support in running the country and therefore we cannot tax them.”

The prince’s indirect and direct tax is 24% of his income for 2012 and 23.6% for 2013. The bottom quartile of households pay 38% and the top 33.7%.

Nye explained the lower level of tax paid was due to the prince paying income tax on income after relevant business expenses. 

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Replies (8)

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By carnmores
16th Jul 2013 18:06

if all the expenses are allowable

the public purse is surely better off if he pays higher rate tax?

Thanks (1)
Mark Lee headshot 2023
By Mark Lee
16th Jul 2013 23:44

"The entire Duchy estate is worth more than £750m"

As accountants we know that this has no bearing on how much tax is payable on income. The figure is irrelevant. Companies don't pay tax by reference to their turnover or by reference to how valuable are their assets. Equally we don't have a wealth tax here and no one is seriously suggesting that we should do so.

Quite why the mainstream media bandy around such irrelevant figures is beyond me. Oh yes, I remember now. They don't understand tax and they want to get readers of controversial reports....

Thanks (3)
By Donald6000
17th Jul 2013 11:54

Landlords

As far as I know the Duchy of Cornwall is mostly a landlord and most landlords I know are not corporations. Therefore why should the Duchy of Corrwall pay Corporation Tax. If he earns £18m pa and he pays £5m tax on it that seems pretty favourable to me. That's between 30 and 40 per cent.

Once again, God save us from the grandstanding Hodge who has an overblown estimate of her own importance.

 

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By listerramjet
17th Jul 2013 11:56

what a wind up

I can understand the political posturing of Hodge, but why would an accountancy site fall for the tax as a % of income ruse.  As has been pointed out, on the same basis Mitchell and Hodge both pay a lower rate than Prince Charles.  People who live in glass houses should refrain from throwing stones!

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Replying to andy.partridge:
By Donald6000
17th Jul 2013 17:32

Throwing stones

listerramjet wrote:

I can understand the political posturing of Hodge, but why would an accountancy site fall for the tax as a % of income ruse.  As has been pointed out, on the same basis Mitchell and Hodge both pay a lower rate than Prince Charles.  People who live in glass houses should refrain from throwing stones!

 

They can say these things on the basis that its easier to do what I say, rather than what I do. The idea of the Public Accounts Committee is to whip the public into a frenzy about what the politicians claim is the alleged wrongdoing of others, such as HRH Prince C, Stabucks, Amazon et al. The problem is that the politicians are doing all the self same things. Thus they are saying what they think the little man in the street would like to hear.

The only time these politicians will learn anything is when they are on the Liverpool Care Pathway. I can't wait.

 

 

 

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Time for change
By Time for change
18th Jul 2013 10:44

I suppose these committee's

are a visual sign, to we peasants, that MP's don't always have their snouts in the trough.

Well, not all the time, thankfully.

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Replying to Paul Scholes:
Red Leader
By Red Leader
18th Jul 2013 11:54

Can't wait ...

... for Charlie to become king. If it wasn't for the fact that Wills comes next, King Charlie III could be the end of the monarchy.

He'll be a constitutional monarch that meddles in politics. They've survived this long by not meddling but Charlie just can't help himself.

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Jennifer Adams
By Jennifer Adams
16th Nov 2013 17:24

The Duchy does good work...

... it is little known and obviously not appreciated by Madam Hodge and her 'pals' that Charlie and the Duchy do good work. In my area of Dorset they have virtually given land to build hundreds of houses on - mostly for 'affordable homes'. The businesses in Poundbury are also looked after.

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