Does Queen Elizabeth pay tax? It’s a question that has been getting quite a lot of attention recently – particularly given the Queen’s name in the recently released Paradise Papers give rise to allegations of tax avoidance.
As it turns out, the Queen isn’t actually legally required to pay tax. Nevertheless, in 1992, Queen Elizabeth opted to pay both income and capital gains tax voluntarily, which she has continued to do every year since. This includes all income generated for the Queen via the Duchy of Lancaster, a private estate established in 1399 to provide the British sovereign with an independent source of income. Today, the estate is worth an estimated £500 million.
The Paradise Papers – another huge leak of financial documents that shed light on the world’s wealthiest elites – have put the Queen’s finances, specifically investments made by the Duchy of Lancaster, into the spotlight. The papers revealed that the British monarch poured around £10 million ($13 million) into funds in both the Cayman Islands and Bermuda via the Duchy. Neither the Cayman Islands or Bermuda – both British Overseas Territories – have any corporation tax. Moreover, the funds seemingly ended up in less-than-reputable entities. Notably, this includes BrightHouse, accused of irresponsible lending practices, and Threshers, which went under owing £17.5m to the UK in tax.
The investments have been widely criticized as “dubious and inappropriate” in the UK. “It is so obvious that if you’re looking after the money of the monarchy, you’ve got to be actually cleaner than clean and you must never go near the dirty world of money laundering, tax avoidance, tax evasion, or actually making money in dubious ways,” Margaret Hodge, an MP for the British Labour Party and the former chair of the Commons Public Accounts Committee, explained, adding that she was “furious” with Queen’s advisors for having made such poor investment decisions.
The Queen’s appearance in the papers is quite a shock given that royal finances are subject to several different audits. This includes an external audit done by KPMG as well as an internal audit conducted by the National Audit Office.
The Duchy has maintained that it didn’t know about the tax advantages presented by investing offshore. “Our investment strategy is based on advice and recommendation from our investment consultants and appropriate asset allocation. The Duchy has only invested in highly regarded private equity funds following a strong recommendation from our investment consultants,” a spokesperson for the Duchy told the BBC. “We operate a number of investments and a few of these are with overseas funds. All of our investments are fully audited and legitimate.”
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