As published on propertyweek.com, Thursday 11 March, 2021.
The Treasury has said it does not think it is necessary to restrict local authorities from using offshore tax havens to purchase commercial property following a Property Week investigation into the practice.
In a letter responding to concerns expressed by Conservative MP Sir Geoffrey Clinton-Brown and seen by Property Week, the financial secretary to the Treasury Jesse Norman said: “Local authorities can continue to acquire property using offshore companies for permitted purposes, i.e. where the property purchase is in order to deliver the local authority’s core functions. Similarly, local authority pension funds can continue to invest in this way.”
As a direct result of the Property Week investigation, Clinton-Brown wrote to the Treasury urging it to clamp down on local authorities avoiding stamp duty land tax by investing in commercial property via tax-haven unit trusts.
The PW investigation found that councils had invested £820m of taxpayers’ money in property trusts based in tax havens and avoided paying an estimated £27m in taxes by doing so.
However, Norman made it clear that the Treasury would not act to stop the practice.
“While I recognise that some local residents may be concerned by this practice, commercial property transactions are regularly structured in such a manner and are done so for a number of reasons, such as risk mitigation or financing,” the letter said.
“While it was correct for the government to amend the lending terms of the PWLB [Public Works Loan Board] to prevent authorities from purchasing commercial property primarily for the purposes of generating income, where these purchases are an acceptable use of the PWLB, I do not think it is necessary to restrict local authorities from using this practice.”