hmrc

HMRC Loses £50m in Stamp Duty from Chelsea Barracks Sale

stamp dutyThe Chelsea Barracks, located in the City of Westminster, is a historical British landmark. Built in the 1860s, its original use was to house two battalions of troops and as a War Office in Central London. The site is now home to a £3.2m make-over  apartments and two new garden squares for the general public to enjoy. In 2007, the Barracks was sold to a Quatar-based bank firm, called Project Blue, by the Ministry of Defense, for £1bn.

However, Project Blue used a finance system which allows them to gain interest on their purchase, which is now legally owned by the bank. HMRC argued that this did not comply with UK tax law, and requested up to £50m in stamp duty tax from the firm. However, Judges at the Court of Appeal came to the conclusion that the tax office pursued the wrong party for the tax owed to them, and exclaimed that the tax office was since out of time to chase the money they demanded. Project Blue commented on the issue to the BBC, saying that they went through the right channels and paid the tax they needed to pay. They also noted that had they known that their system was illegal in the UK, they would have pursued another way to go about the sale of The Chelsea Barracks. As well as this, the company discussed the matter of tax concern, stating that they will comply with whatever HMRC needs from them, if their appeal is accepted by judges at the Court of Appeal.

HMRC is disappointed in the current decision from the Court of Appeal, and plans on appealing soon for the tax they are rightfully owed from the Quatar-based company. If the tax authority fails to obtain the money, it will raise even more questions into the complexity of UK tax law – especially if even HMRC can be caught off guard by foreign companies. Richard Murphy, the director of Tax Research UK, spoke out about the case, saying that HMRC needs more and more resources to do its job well and efficiently. He also discussed with the BBC the fact that it is impossible to run a tax office “on the cheap”.

Quatar investments make up for a lot of owned property in London. Firms have shares in The Shard, Heathrow and Barclays bank. The number is rising steadily, and it’s estimated that roughly 20% of property in London is owned by Quatar-based firms.