Qatari ruling family hit with £38million stamp duty bill after using tax avoidance scheme on purchase of Chelsea Barracks

The Qatari ruling family has been ordered to pay £38million in stamp duty

They used an aggressive tax avoidance scheme to avoid the huge bill

Country bought 13-acre site from the MoD for almost £1billion in 2007

By LOUISE ECCLES, BUSINESS CORRESPONDENT FOR THE DAILY MAIL

PUBLISHED: 01:57 GMT, 20 December 2014 | UPDATED: 12:11 GMT, 20 December 2014

The Qatari ruling family has been ordered to pay £38million in stamp duty for the purchase of Chelsea Barracks after using an aggressive tax avoidance scheme to avoid the bill.

The oil-rich country bought the 13-acre site from the Ministry of Defence for almost £1billion in 2007, making it Britain’s most expensive residential development site.

But the Qataris powerful sovereign wealth fund did not pay any stamp duty on the purchase after employing complex tax avoidance methods.

The country’s investment arm sold the land to its own bank and then leased it back, exploiting a tax break called sub-sale tax relief, the taxman said.

The loophole enables buyers to avoid paying stamp duty on a property they are buying by transferring it to a trust at the same time as they complete the sale.

In doing so, HM Revenue and Customs said ‘they attempted to eliminate all of the stamp duty land tax due on the purchase of the barracks’.

The Qataris claimed they had done this for commercial purposes, and not to avoid tax, but their argument was yesterday rejected by the courts.

The upper tribunal upheld a previous legal ruling which found the Qataris had unfairly side-stepped the tax.

It is unclear if the taxman will now examine the tax paid on other multi-million purchases by the sovereign wealth fund.

Labour MP Margaret Hodge, who has campaigned against tax avoidance by large corporations, said: ‘It never fails to amaze me how extremely rich people will go to such extreme lengths to avoid paying their fair share of tax.

‘If you can afford to pay £1billion worth of property then you can afford to pay a £38million tax bill.’

The famous barracks were sold to the Qatar Investment Authority (QIA), a Qatari government-owned body charged with managing the sovereign wealth fund.

The QIA has acquired at least £5billion of commercial property in London the last seven years, including famous building such as Harrods, in Knightsbridge, The Savoy Hotel, Park Lane Hotel and the Olympic Village.

This is more than half the value of the entire Crown Estate, a wealthy portfolio of and buildings and property which funds the Queen’s expenses.

Only last week, the QIA bought the HSBC headquarters in Canary Wharf for about £1.1billion after fending off Chinese rivals.

Simon Mallinson, of Real Capital Analytics, said provisional data suggested the Qataris had been ‘the largest commercial property investor in the UK this year’.

And the sovereign wealth fund is set to make even more when it builds hundreds of homes on lucrative land at Chelsea Barracks, in central London.

The QIA bought the barracks for nearly £959 million – originally in partnership with Christian Candy’s CPC Group – but bought out CPC’s share in 2010.

Plans to build modernist towers on the site was axed after Prince Charles wrote an emotional letter to Qatar’s prime minister claiming the designs ‘made my heart sink’ and would be a ‘gigantic experiment with the very soul of our capital city’.

Qatar’s prime minister, Abdullah bin Nasser bin Khalifa Al Thani, recently revealed the country has ‘interests’ in £23billion worth of UK property and business.

He said: ‘Our interests, in companies as diverse as Barclays and Sainsbury’s, Heathrow airport, Harrods and Canary Wharf, total more than £23billion.

‘These are not short-term investments. It is clear that both our countries benefit hugely from them.’

Sandhurst-educated Sheikh Tamim bin Hamad Al Thani, has also previously boasted of his British buy-up, saying: ‘We are investing everywhere. Even your Harrods – we took it.’

The Qataris are the latest in a long line of businesses and sovereign wealth funds accused of avoiding UK tax.

Google, Apple, Starbucks and Amazon have all been accused of shirking their full tax liabilities through complex avoidance schemes.

David Gauke, financial secretary to the Treasury, said: ‘HMRC’s position in this important case has now been backed twice by the courts.

‘The message is clear – tax avoidance is complex, expensive and self-defeating.’

A further 24 businesses and 900 homeowners who used a similar method to avoid their tax responsibilities will also now be told to pay up, which could net taxpayers another £85million.