Did Prince Andrew avoid a £6 million tax bill when he sold Sunninghill to his Kazakh friends?
The Duke of York used a complicated tax avoidance scheme to save up to £6 million in tax on the profit he made on sale of his home to a Kazahk billionaire for £15 million, it can be revealed.
Prince Andrew, Duke of York Photo: AFP/GETTY IMAGES
Prince Andrew sold the five acre property to an offshore trust which belonged to Timur Kulibayev, the billionaire son-in-law of the Kazakh president, Nursultan Nazarbayev, who he had entertained as part of his Government role as Britain’s trade ambassador. Kulibayev has a child with Andrew’s socialite friend Goga Ashkenazi
The controversy surrounding the sale of the 12 bedroom house in 2003 for £3 million over the market value was compounded when the new owners failed to move in and left the house, built as a wedding gift from the Queen to the Duke and Sarah Ferguson, to fall into a state of disrepair.
Now an examination of the official documents related to the transaction by tax and property barristers suggests the Duke used a complicated legal arrangement to ensure he was not forced to pay 40 per cent capital gains tax for which he could have been liable.
Home owners are allowed to sell their properties without paying tax as long as they can show it is their main home, that they did not buy the property simply for profit and can show they had lived in it at least three years before the sale. But Prince Andrew’s disposal of the Sunninghill house was not this clear cut.
The new analysis reveals:
* The Duke never personally owned Sunninghill.
* The lease on Sunninghill was in the Queen’s name.
* Royal advisers paid just over £12,000 to buy the freehold of the property from the Crown Estate, which had owned it for the benefit of the nation.
* The Queen’s personal lawyer and her most senior financial adviser, not Prince Andrew, signed off on the sale to the new Kazahk owner.
Land registry documents show that in March 2003 the Duke decided to leave Sunninghill for good and had signed a £1 million lease on the late Queen Mother’s former home, Royal Lodge, on the Windsor estate. The house, it was announced, was to be his new official residence.
The Duke could not move in immediately as the pink-washed Lodge needed to be completely refurbished at a cost, according to the National Audit Office, of more than £7.5 million, for which the Prince was apparently liable under the terms of his new lease.
However the Sunninghill sale did not go ahead until September 2007 - more than four years later and longer than the tax exemption rules normally allow.
During this period the Duke was seemingly desperate to secure a buyer and reportedly used trips to Saudi Arabia and Bahrain to drum up interest in the property among wealthy people he met in his official role.
The deal is further complicated by the opaque ownership of Sunninghill. The land was owned by the Crown Estate, whose huge property portfolio is held “to benefit the taxpayer” with revenue going straight to the Treasury.
In 1987 a 125 lease was registered for land in Sunninghill Park in the names of the Queen, The Crown Estate and a company called Tyrolese (83) Limited, whose directors worked for Farrer and Co, the Queen’s lawyers. The price paid for this was not recorded, but it was on this land that the house for the Duke and his new bride was built.
By 1996 the couple had divorced with the Duchess reportedly relinquishing any claim on the house, where the Duke continued to live.
After the death of the Queen Mother in 2002 he began negotiating his move to Royal Lodge and signed a lease early in 2003.
However there was a problem about what to do with Sunninghill, a 1990 unfashionable two-storey red-brick house dubbed “Souhyork”, which was seen as difficult to sell and with a lease which is believed to have restricted its transfer to other members of the royal family.
In September 2003 the freehold of Sunninghill was sold to Mark Bridges, a lawyer at the Queen’s solicitors Farrer and Co, and Sir Alan Reid, Keeper of the Queen’s Privy Purse, who controls her personal income. Both were acting as trustees for The Sunninghill Park Settlement, a secret trust set up three years earlier.
The new freehold, which cost just £12,265, released the house from the constraints previously placed on any future sale.
However, it also raised a number of questions about who was now the owner of Sunninghill. The Sunninghill Park Settlement is private and its beneficiaries secret.
Royal officials have always suggested that the Duke of York owned Sunninghill and that it was he who sold it to the Kazakhs.
But legal experts suggest if he was behind the purchase of the freehold at the same time as he was preparing to move out of the house for good he might fall foul of tax avoidance rules.
Tax law says that you cannot buy an interest in a property which you have no intention of living in and purchase merely to sell on for a profit.
Property barrister Mark Loveday suggested that the sequence of events surrounding the Duke’s purchase of the freehold could fall foul of this law. He said: “There are anti-avoidance provisions in the legislation which prevent you buying a property simply to then sell it on. This is to stop property developers claiming tax relief.
“If, as it appears, the Duke purchased the freehold of the property at a time when he had no intention of living there, there must be a question mark of whether he is liable for tax on any gain which resulted.”
A second tax expert said that the case law in the area also suggested the Duke of York was liable for tax on Sunninghill. The Appeal Court case had ruled that a divorcing husband who moved into a new house, he had originally purchased for him and his wife, for a short period while their separation was finalised had to pay capital gains tax on his profit because he knew that it was a short term acquisition.
However there is a further intriguing possibility. The trustees that purchased the freehold of Sunninghill are two of the Queen’s most trusted advisers.
The document also places a number of new restrictions on the future use of the house in the name of the “Her Majesty and Her Successors and the Commissioners (of the Crown Estate)”.
Both appear to be evidence that the ultimate purchaser of the house was Her Majesty the Queen who is exempt from capital gains tax and would also have been in the position of selling it on and gifting the money to the Duke of York, again with no tax payable.
Last night sources with a detailed knowledge of the transaction claimed that the Duke had no tax liability on the sale of Sunninghill. They said confidential documents made the ownership of the house clear cut.
The decision to buy the freehold making a future sale more straight forward was described as a “normal transaction” which many homeowners with a long and valuable lease did to make selling and alternations to their property easier.
The source also suggested that only a small sum was paid for the freehold because the long lease which it replaced had been costly and reflected the value of the property. However this figure, which would have been paid to the Treasury, is confidential.
The source also disputed any suggestion that the time of the purchase of the lease on Royal Lodge and the purchase of the freehold on Sunninghill made it liable for tax. He added that the owner of Sunninghill qualified for tax relief as it had been their main home for many years.
A Buckingham Palace spokesman said: “It was a private sale between two trusts. All appropriate taxes were paid.”
* The lease on Sunninghill was in the Queen’s name.
* Royal advisers paid just over £12,000 to buy the freehold of the property from the Crown Estate, which had owned it for the benefit of the nation.
* The Queen’s personal lawyer and her most senior financial adviser, not Prince Andrew, signed off on the sale to the new Kazahk owner.
Land registry documents show that in March 2003 the Duke decided to leave Sunninghill for good and had signed a £1 million lease on the late Queen Mother’s former home, Royal Lodge, on the Windsor estate. The house, it was announced, was to be his new official residence.
The Duke could not move in immediately as the pink-washed Lodge needed to be completely refurbished at a cost, according to the National Audit Office, of more than £7.5 million, for which the Prince was apparently liable under the terms of his new lease.
However the Sunninghill sale did not go ahead until September 2007 - more than four years later and longer than the tax exemption rules normally allow.
During this period the Duke was seemingly desperate to secure a buyer and reportedly used trips to Saudi Arabia and Bahrain to drum up interest in the property among wealthy people he met in his official role.
The deal is further complicated by the opaque ownership of Sunninghill. The land was owned by the Crown Estate, whose huge property portfolio is held “to benefit the taxpayer” with revenue going straight to the Treasury.
In 1987 a 125 lease was registered for land in Sunninghill Park in the names of the Queen, The Crown Estate and a company called Tyrolese (83) Limited, whose directors worked for Farrer and Co, the Queen’s lawyers. The price paid for this was not recorded, but it was on this land that the house for the Duke and his new bride was built.
By 1996 the couple had divorced with the Duchess reportedly relinquishing any claim on the house, where the Duke continued to live.
After the death of the Queen Mother in 2002 he began negotiating his move to Royal Lodge and signed a lease early in 2003.
However there was a problem about what to do with Sunninghill, a 1990 unfashionable two-storey red-brick house dubbed “Souhyork”, which was seen as difficult to sell and with a lease which is believed to have restricted its transfer to other members of the royal family.
In September 2003 the freehold of Sunninghill was sold to Mark Bridges, a lawyer at the Queen’s solicitors Farrer and Co, and Sir Alan Reid, Keeper of the Queen’s Privy Purse, who controls her personal income. Both were acting as trustees for The Sunninghill Park Settlement, a secret trust set up three years earlier.
The new freehold, which cost just £12,265, released the house from the constraints previously placed on any future sale.
However, it also raised a number of questions about who was now the owner of Sunninghill. The Sunninghill Park Settlement is private and its beneficiaries secret.
Royal officials have always suggested that the Duke of York owned Sunninghill and that it was he who sold it to the Kazakhs.
But legal experts suggest if he was behind the purchase of the freehold at the same time as he was preparing to move out of the house for good he might fall foul of tax avoidance rules.
Tax law says that you cannot buy an interest in a property which you have no intention of living in and purchase merely to sell on for a profit.
Property barrister Mark Loveday suggested that the sequence of events surrounding the Duke’s purchase of the freehold could fall foul of this law. He said: “There are anti-avoidance provisions in the legislation which prevent you buying a property simply to then sell it on. This is to stop property developers claiming tax relief.
“If, as it appears, the Duke purchased the freehold of the property at a time when he had no intention of living there, there must be a question mark of whether he is liable for tax on any gain which resulted.”
A second tax expert said that the case law in the area also suggested the Duke of York was liable for tax on Sunninghill. The Appeal Court case had ruled that a divorcing husband who moved into a new house, he had originally purchased for him and his wife, for a short period while their separation was finalised had to pay capital gains tax on his profit because he knew that it was a short term acquisition.
However there is a further intriguing possibility. The trustees that purchased the freehold of Sunninghill are two of the Queen’s most trusted advisers.
The document also places a number of new restrictions on the future use of the house in the name of the “Her Majesty and Her Successors and the Commissioners (of the Crown Estate)”.
Both appear to be evidence that the ultimate purchaser of the house was Her Majesty the Queen who is exempt from capital gains tax and would also have been in the position of selling it on and gifting the money to the Duke of York, again with no tax payable.
Last night sources with a detailed knowledge of the transaction claimed that the Duke had no tax liability on the sale of Sunninghill. They said confidential documents made the ownership of the house clear cut.
The decision to buy the freehold making a future sale more straight forward was described as a “normal transaction” which many homeowners with a long and valuable lease did to make selling and alternations to their property easier.
The source also suggested that only a small sum was paid for the freehold because the long lease which it replaced had been costly and reflected the value of the property. However this figure, which would have been paid to the Treasury, is confidential.
The source also disputed any suggestion that the time of the purchase of the lease on Royal Lodge and the purchase of the freehold on Sunninghill made it liable for tax. He added that the owner of Sunninghill qualified for tax relief as it had been their main home for many years.
A Buckingham Palace spokesman said: “It was a private sale between two trusts. All appropriate taxes were paid.”
