Panama fingered as haven for UK property tax dodgers

Panama has once again popped up as a haven for tax dodgers, this time for those with British roots

The widespread use by wealthy individuals of companies based in the Cayman Islands, Panama and the Dutch Antilles to buy up prime property in London is costing the Exchequer millions  of pounds a year say British newspapers. Loopholes allow owners to avoid stamp duty, inheritance tax and capital gains tax.

The Times has learned that 2,837 overseas companies have bought mansions worth £2 million or more in the London boroughs of Westminster and Kensington & Chelsea during the past decade. 

Luxury estate agents Savills estimates that “offshore vehicles involved in Westminster and Kensington & Chelsea could hold as much as £17.3 billion of property.”  As a rough guide to what this is costing Britain, if all those properties were sold at once and the 15 per cent stamp duty was avoided, the Exchequer would miss out on £2.6 billion.

Separately, it has emerged that most of the homes on The Bishops Avenue, the so-called ‘billionaire’s row’ in north London, are owned by “corporate entities”.

Chancellor of the Exchequer George Osborne is expected to introduce new measures from April which would force non-UK residents to pay capital gains tax on residential property. He will also impose an annual charge on company-owned homes: those worth between £2 million and £5 million will attract a £15,000 payment. Companies owning a property worth £20 million or more would face a demand for £140,000.

These measures come on top of his plans to provide an extra £154m to pay for new tax inspectors to help crack down on tax avoidance by multinationals. · 

The reports  come in the midst of a widening scandal over multi-national corporations like Starbucks and Amazon  avoiding value added taxes (VAT) on sales in Britain.

New research by Greenwich Consulting predicts Britain will lose £10bn in unpaid VAT between 2008 and 2014 – more than enough to have paid the £9bn bill for London Olympics, says  The Guardian. Online stores such as Amazon take advantage of EU tax rules that allow VAT on ‘electronic services’ – ebooks, music downloads and online apps – to be applied at the rate imposed by the country where the company selling the item is headquartered, rather than the rate that applies in the country where the service was bought. 

Amazon, for example, is headquartered in Luxembourg, so it charges three per cent VAT on electronic services as opposed to the 20 per cent rate levied in the UK. 

Tax specialist Richard Asquith believes the true loss to the UK Treasury is far more than £1.6bn a year. He explains: "What they may not be figuring in is sales of computer games and apps over the internet from outside of the EU”

Conservative MP and former tax lawyer Charlie Elphicke said: "This is yet another example of industrial-scale tax avoidance by foreign-owned multinational corporations. Their behavior is irresponsible, unethical and unacceptable.”