Joel Muckett 8 Nov 2017 01:36pm

Labour councils avoided £12m in tax, says report

Two Labour-run councils have allegedly avoided paying more than £12m in stamp duty tax when purchasing commercial properties through the use of offshore companies

Sefton and Warrington councils purchased the properties, and Big Four firm PwC, which was once accused of being complicit in tax avoidance by Labour, was an adviser in one of the transactions, according to an investigation by The Times.

The investigation came after Labour leader Jeremy Corbyn suggested the Queen should apologise for her offshore investments if they were designed to avoid tax.

However, The Times report found that in May, Merseyside-based Sefton council purchased the Strand Shopping Centre through a company registered in Luxembourg for £32.5m, saving £1.6m on stamp duty tax in the process. Additionally, the council bought an insurance policy against the possibility of being taxed.

In July, Warrington council purchased Birchwood Park, a business centre in Cheshire, through an offshore company for £200m. The council saved £10.5m in stamp duty tax.

Sellers of the commercial properties may have avoided paying capital gains tax due to the councils agreeing to the purchases.

Liberal Democrat leader Sir Vince Cable said Jeremy Corbyn’s stance on tax avoidance appeared “hypocritical” in light of the investigation.

“The Labour leadership has spoken loudly about stamping out tax avoidance, yet Labour-run local authorities have avoided more than £10m in stamp duty alone through complicated tax structures when speculating in commercial property,” he said.

“The Labour leadership’s stance appears somewhat hypocritical until they have their own house in order.”

A spokesman for Sefton council said, “In no way has there been any avoidance of tax relating to the purchase of the Strand Shopping Centre. We paid all the tax due and will continue to do so regarding this important asset.”

He added that the council had bought the company that owned the asset and upon completion would “hive up” assets after liquidating the corporate structure.

A spokesperson for PwC said, "The advice we provide is given in accordance with all applicable laws, rules and regulations, including proper disclosure to tax authorities, and adheres to the highest professional standards and our own tax global code of conduct.” 

A spokesperson for Warrington council said that because Birchwood Park was held as an offshore investment, the owners did not have to pay UK corporation tax on their income.

“The only tax not being paid by the council is a one-off payment of Stamp Duty Land Tax. This position would change if the council or any subsequent owner decided to bring the asset onshore.

“To complete the acquisition in a timely and efficient manner the council agreed to leave the business offshore.”

The subject of offshore tax havens has been brought into the spotlight following the Paradise Papers leak, exposing the world elite’s tax affairs.

Numerous names have been implicated in the leaks, including the Formula One world champion Lewis Hamilton, who yesterday was found to have avoided tax on the purchase of a private jet.