ROCK stars including Sir Mick Jagger and Bob Geldof are among the wealthy who have put almost 100,000 properties worth an estimated £200 billion into offshore companies. The practice is denying the country more than £1 billion a year in lost tax, including millions in stamp duty.
The Land Registry has calculated that in the past 12 years a total of 94,760 properties have effectively been placed offshore and beyond the reach of the taxman. They include castles, Highland estates, townhouses and even parking spaces.
George Osborne, the chancellor, is expected to crack down on stamp duty avoidance in this week’s budget. However, hundreds of millions of pounds in tax will have been lost through the use of this method.
Jagger, who has been non-resident for tax for 40 years, signed a 99-year lease on a property in Chelsea, west London, in 2008 through a company based in the British Virgin Islands (BVI).
His spokesman said he gained no tax benefits from this and had registered the house through the company for security reasons.
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The Beatles drummer Ringo Starr transferred his Surrey estate into a Jersey company in March 2009, according to Land Registry documents. He could not be reached for comment. The Oxfordshire home of George Harrison, the Beatles lead guitarist, was transferred into a Jersey company for £17m in 2005. His son Dhani and his widow Olivia are registered at the address on the electoral roll.
Bob Geldof, an Irish citizen and Third World poverty campaigner, has properties in central London and Kent which are owned by BVI companies. A source close to Geldof said it was “perfectly legitimate” tax planning and denied it was linked to avoiding stamp duty.
Among the overseas tycoons who have placed property here into offshore companies are the Hinduja family, valued at £6 billion in The Sunday Times Rich List. Their substantial home near Buckingham Palace is owned through a company registered in the BVI in a transaction worth £66.5m. They were not available for comment.
Rasha Said, the 26-year-old daughter of the billionaire Wafic Said, has a house in Belgravia, central London, also owned offshore while her father’s estate, Tusmore Park in Oxfordshire, is held in a company in Canada. A spokesman said stamp duty had been paid on both properties.
Lakshmi Mittal, Britain’s richest man, transferred the ownership of his £57m home in Kensington, west London, into a British company in 2004. His spokesman said he had paid stamp duty. Muammar Gadaffi’s son, Saadi, owned a house in Hampstead Garden Suburb, north London, costing £10m through a BVI-registered company.
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Some celebrities own their properties through UK-registered companies, which also has potential tax advantages. Among these is Sting, the rock star, whose country estate in Wiltshire has been held since 1994 via a British company, Lake House Estate.
There are big tax savings from putting a property into a company, either offshore or registered in the UK. Once the property is in a company it can be sold on without incurring stamp duty. On a property worth £5m, this could save the purchaser £250,000. The seller could therefore expect to get a higher price.
There are further benefits if the company is offshore. Depending on their tax status, the owner could also avoid £2m inheritance tax, charged at 40%, when they die. The owner of a £5m house placed in an offshore company can — if they are not resident or domiciled here for tax — sell it without the sale incurring £250,000 stamp duty.
John Simpson, the BBC’s world affairs editor, revealed that his family’s London townhouse, bought for £1.85m in 2004, is owned through a company in the Bahamas controlled by his wife, Adele Kruger, a South African national. But he had decided to put it back in the couple’s names, even though this will cost him a “six-figure sum” in capital gains tax.
Simpson, who moved to London from Ireland six years ago, said: “It’s nothing to do with what might be in the budget. I don’t like the idea of having anything offshore. We just took a decision, a moral decision, that we wouldn’t be taking advantage of these things any more.”
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He added: “I just feel now that there is a distasteful type of tone about all of this — things based in the Bahamas, Monte Carlo and so on. I am not judging other people, I just don’t want to be a part of that myself. I just want my affairs to be nice and clear and open.”
Sir Robert Worcester, 78, founder of Mori, the pollster, said he placed his grade I listed home, Allington Castle in Kent, into an American company in 1996. The castle was fortified in the late 13th century under Edward I and has featured in the Colditz television series.
Worcester told The Sunday Times that he had placed the property offshore to keep it in his family and that his decision had nothing to do with saving money: “I was not seeking anything to do with stamp duty. I have done it to protect it.”
Mohammed bin Rashid al-Maktoum, the ruler of Dubai and a keen supporter of British horse racing, owns the 63,000-acre Inverinate estate in the Scottish Highlands. Official records show it is controlled by Smech Properties Ltd, a company based in Guernsey.
A spokesman for the estate said: “The whole thing is a very private concern held exclusively for his royal highness and his family.”
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The Sunday Times has established that a total of 122 different territories have been used to shelter homes and business premises from the taxman.
The Isle of Man is the most popular haven, with 23,147 properties registered there since January 1999, while the BVI have been used for 18,494.
However, the tax savings are also available if properties are registered in European Union countries. The Republic of Ireland came fifth and the Netherlands and Germany also featured in the top 20. The United States came in the top 10. Taiwan, Zimbabwe, Iran, Uganda and Libya were some of the more unusual choices.
Some areas of central London have more than one in 20 properties owned offshore. The value of properties held in just four boroughs — Westminster, Kensington & Chelsea, Camden and Hammersmith & Fulham — is more than £100 billion, at an average price of £5.67m.
The national total is likely to exceed £200 billion assuming an average price of £1.3m each for the remaining 76,000 properties in the rest of London and elsewhere in Britain.
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The chancellor is also expected to use the budget to close down schemes used by British homebuyers to save stamp duty levied on properties worth up to £1m. Accountants say the dodge has become so popular that in the past few months it has been promoted to half of all homebuyers in the £300,000 to £1m range.
British families have been rushing to take advantage of such schemes which can save them as much as £20,000 on a £500,000 home. The schemes do not involve placing the property in foreign ownership but exploit “sub sale relief” — a loophole intended to spare developers from having to pay stamp duty twice.
A family can take advantage of this by buying a £475,000 home and then transferring it into a trust at a value below the £125,000 stamp duty threshold. However, fees can eat up nearly half of the £14,250 saving.
The budget is expected to impose an outright ban on schemes used in this way from midnight on March 21. HM Revenue & Customs also intends to pursue past purchases and could force homeowners to pay more in penalties than they have saved in tax.
Those holding properties in an overseas company can expect to avoid inheritance tax, but if they sell on the property they could be forced to notify the taxman and the buyer could be forced to pay stamp duty.
50p rate goes
George Osborne is expected to signal this week that the 50p top rate of income tax will be axed. The chancellor is expected to reduce the rate on earnings over £150,000 to 45p, but not with immediate effect.