Tax raid on super-rich hiding mansions in offshore firms raises £100million, FIVE times more than expected
- Treasury moved to close loophole used by wealthy to avoid stamp duty
- By placing homes in companies they can be sold without paying tax
- Ministers had expected the new levy to raise £20million this year
- But Danny Alexander reveals it is on course to generate £100million
A crackdown on the rich and famous who own mansions through offshore companies is on course to raise five times more than expected.
Pop stars, actors and jetsetters were able to avoid paying stamp duty when they bought and sold multi-million pound properties by selling it as part of a ‘company’ based abroad.
A move to close the loophole had been expected to raise £20million this year, but it is now set to net the Treasury £100million.
Two years ago it emerged that every home in Cornwall Terrace in North London had been transferred to a company on the Isle of Man
Anyone using a scheme which places properties in an offshore firm face an annual tax of between £15,000 and £140,000 on mansions worth more than £2million.
Failure to tell the HM Revenue and Customs about a scheme would also incur a £1,000 fine.
At the Budget last year the Treasury said it would raise £20million in the first year from April but by December it had already netted £92million.
By the end of the financial year in March it is expected to have topped £100million.
Danny Alexander, Lib Dem Chief Secretary to the Treasury, told MailOnline: ‘A vital part of building a stronger economy and a fairer society is to make sure that everyone pays their taxes.
Chief Secretary to the Treasury Danny Alexander said it was ‘wholly unfair’ that wealthy homeowners were avoiding paying tax
‘It was wholly unfair that wealthy owners of large houses in the UK could avoid paying tax by arranging the ownership of the property through an off shore company.
‘One of the Liberal Democrat priorities in the coalition is to deal with such loopholes which were left un-tackled by the last Labour Government.
‘This tax avoidance measure has been dramatically successful, raising £92 Million, over 5 times the initial forecast. This result shows the strength of our resolve to repair our tax system and make it fair for all.’
Around 5,000 people are thought to own properties through British and offshore companies, a practice which offers tax advantages as well as anonymity.
Two years ago it emerged that in exclusive Cornwall Terrace in North London, where the average asking price was £35 million, every single home has been transferred to a company on the Isle of Man.
Transferring ownership of a property to an off-shore company means that when it comes to be sold the buyer purchases the company as a whole, assuming de-facto ownership of the property.
Because the deal is classed as a corporate transaction as opposed to a property sale there are no stamp duty obligations involved.
This means that while a family buying a home costing £400,000 would pay £12,000 to the Government, a multi-millionaire buying a luxury pad could pay nothing.
The savings involved can be vast. Someone who purchases a £50million property though an off-shore company would avoid paying the treasury £2.5million.