Being a little bit closer to home this may be interesting accountants and individuals in the South West slightly more than those further afield. However, yesterday the prince’s most senior official 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.
Select details are as follows, many thanks to Rachael Powers article on accountingweb.
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.