Nov 28 2011

More on the world’s most expensive apartment block

Posted by: Nick Shaxson in: Thoughts

The UK’s Observer has provided more information following the Sunday Times story about One Hyde Park in London, reportedly the most expensive apartment block ever built anywhere on Earth. As earlier reported:

“The records reveal extensive use of tax havens to purchase the properties with the British Virgin Islands, involved in 25 deals, the most popular choice. Critics of tax avoidance by the super-rich will point out that an estimated £750m a year has been lost nationally in duty due to the use of offshore vehicles.”

As I noted, by far the biggest tax haven fingered in this investigation is the appallingly sleazy British Virgin Islands, with 25 of the 86 properties registered there. For those who want to know how the tax dodging works, this story provides a longer explanation about UK Stamp Duty, the tax involved:

The tax dodge involves transferring ownership of a property to an off-shore company so when it comes to be sold the buyer purchases the company as a whole assuming de-facto ownership of the property. This means that while a family buying a home costing £400,000 would pay £12,000 to the Government, a multi-millionaire buying a luxury pad could pay nothing. Because the deal is classed as a corporate transaction as opposed to a property sale there are no stamp duty obligations involved.
. . .

The savings involved can be vast. Someone who purchases a £50million property though an off-shore company would avoid paying the treasury £2.5million.”

It’s a scandal, from top to bottom. For reasons that have nothing whatsoever to do with building a more innovative, productive economy, and everything to do with transferring wealth from rich to poor. The tax haven classic: the poor pay more, the rich pay less

That’s not all of the sleaze, though.

The ownership of the Knightsbridge apartments, which range in price from £3.6m for a one-bedroom flat to £136m for a penthouse, is now under investigation by Westminster city council, which is determined to pursue the monies owed by the secretive owners of the apartments.

Council records show that only four owners are paying the full council tax of £755.60 a year plus £619.64 to the Greater London Authority, while five are paying the 50% discounted council tax owed on a second home.

Westminster has received no response from the developer of One Hyde Park, Project Grande (Guernsey), managed by billionaire brothers Nick and Christian Candy, to a written request sent two weeks ago asking for the names of the remaining apartment owners. Officials are now researching Land Registry records for the exclusive block, sandwiched between Harvey Nichols and the Serpentine. However, the myriad offshore companies protecting the identities of residents are, according to sources at the council, likely to defeat them.

Another tax haven classic. Nothing is done – until the media exposes the problem. Why does it have to wait until now?

We expect that the council will now put on a show of pursuing the case – then saying ‘we can’t break through the tax haven secrecy’ and wash their hands of the whole sordid affair. And One, Hyde Park is far from the only case.  From the Daily Mail:

“In exclusive Cornwall Terrace in North London (pictured), where the average asking price is £35 million, every single home has been transferred to a company on the Isle of Man.”

Well done these newspapers. Note, once again, that we have left-wing and right-wing newspapers excoriating these practices. It’s something I’ve long believed: like the fight against corruption, the fight against offshore abuse isn’t the exclusive preserve of left and right. It’s potentially the touchstone for a whole new brand of politics.

There are several ways to tackle this abuse. One would be to fix the tax code so you can’t avoid stamp duty by going offshore. Another excellent approach would be for the UK to give the British Virgin Islands an ultimatum: stop all this corrupt activity or you will be made fully independent. A third one, from Treasure Islands:

“A land value tax is a tax not on property ownership, but on land. Whether or not that piece of prime real estate is owned by a Russian oligarch hidden behind a Liechtenstein anstalt, its bricks are rooted firmly in the soil, and the tax can be levied. Because land cannot move, this tax is proof against offshore escape. It encourages and rewards the best use of land, and keeps rents lower than they would otherwise be.”

All would be worth pursuing. However, successive UK governments have historically shown themselves unable to muster the political will to tackle any of them. This particular government has an unusually poor record in this respect.

So it has to be the general population that stands up to demand change.

And we are encouraged this morning to see that things are stirring.

2 comments so far

Meg Howarth 11th November, 2011 6.27 pm

You let Labour and Lib Dems off the hook too lightly re LVT. Here’s Ed Miliband on 2010 general-election campaign:

Silence since, of course. Warned off by the party hierarchy, perhaps, aware of the fondness for property portfolios amongst politicians – and media types? Too afraid to burst the UK’s ugly and pervasive rentier-mindset?

As for the Lib Dems: understand Nick Clegg is – maybe now ‘was’ – a member of LibDem ALTER, a members’ organisation that supports LVT.

Seems one house good, two or more better, might be narrowing our politicians minds.

Nick Shaxson 11th November, 2011 7.35 am

Hmm. I hear the Labour Party is now officially against a financial transaction tax too.

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