Tax avoidance: a capital idea!

Courtesy of Private Eye:

“OFFSHORE investors avoiding millions in tax spent £7 billion on London’s lavish properties in last year sending market prices soaring.” So screamed a Daily Mail headline a year ago. What the newspaper didn’t report was that a chunk of the “offshore” purchases of prime London property were accounted for by its very own proprietor, Lord Rothermere.

Home for Rothermere, his wife Claudia and their five children is Ferne House, a neo-Palladian mansion in 224 acres of grounds in Wiltshire. But the family also has a London house on Addison Road, Holland Park, a ten-minute walk up Kensington High Street from the Mail’s Derry Street headquarters. This is no pokey pied-a-terre either. Property website Zoopla, part of Rothermere’s Daily Mail and General Trust plc group, values it at £21.75m.

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The London house was bought in 2001. This was a couple of years after the Rothermeres had bought Ferne Park and commissioned the mansion from architect Quinlan Terry – not by the Rothermeres themselves, but by a British Virgin Islands company called West Land Assets Ltd, for £9.5m with no mortgage required against the property.

Trustees of a trust

A 2003 application for planning permission for changes to the property, including an extension for a swimming pool, made in the names “Lord and Lady Rothermere” indicates that this was an offshore vehicle for the Rothermeres. The following year, the house was sold again for £8.5m with the new owners now given on Land Registry documents as Lord and Lady Rothermere themselves, subject to charge, almost certainly relating to a loan, from private bankers Hoare & Co. A clause in the title document suggest the Rothermeres did not become owners outright but as trustees of a trust. Such are the undemanding requirements of British property registration and the secrecy of trusts that its location and beneficiaries are secret.

The Rothermeres’ affairs appear to be run largely by accountant David Nelson of Dixon Wilson, who replaced Lord Rothermere on title documents for the Addison Road house – and thus, it appears, as a trustee alongside Lady Rothermere – in September 2010.

More recently what is almost certainly the trust behind the property was (unusually) named when a footnote in a DMGT financial results announcement last month mentioned that in the previous year the company “disposed [sic] certain assets for consideration of £0.1 million to The Addison Road Settlement whose trustees are Lady Rothermere, wife of the company’s chairman and David Nelson, a non-executive director of the company”.

Foreign domicile

The beancounter Nelson thus has feet firmly in both the Rothermere family camp and the publicly traded DMGT, where he sits on the board’s remuneration, audit and investment committees. On his own firm Dixon Wilson’s website he boasts of “considerable experience and expertise in helping wealthy families, and their businesses, and landed estates concerning tax… with a particular emphasis on the UK aspects of international tax, offshore trusts and the UK resident who has retained a foreign domicile”. This explains his usefulness to Lord Rothermere who, despite being born and bred in Britain and permanently occupying some swathes of British soil, claims “domicile” in, er, France (exposed in the Eye four years ago).

This privileged tax position, under which offshore income is taxed only when remitted to the UK, along with the inheritance tax and stamp duty advantages, goes a long way to explain the trust and offshore companies. While complex Bermuda/BVI/Geneva channels for Rothermere’s income, revealed in Eyes 1231 and 1351, transform it into offshore income, valuable property can allow money back in tax-free as loans secured against the bricks and mortar rather than as taxable income.

Offshore banker

In January 2011, four months after Nelson appeared as trustee of the Addison Road settlement, a new lender appeared in offshore banker RBC Europe. It is reported in Land Registry records as being “under an obligation to make further advances” against the security of the £21m townhouse, which would facilitate such a scheme.

Rothermere’s other tax-efficient offshore property deals include the 2005 purchase of Ferne Park Cottage on the Wiltshire estate for £640,000 in the name of the same BVI company, Harmsworth Trust Co Ltd, that acts as trustee to the trusts holding Rothermere’s Jersey investment vehicle, Rothermere Investments Ltd. Since October last year it has been subject to a charge in favour of Barclays Private Bank and Trust Co in Jersey which is also set to “make further advances”.

In December 2011 yet another trust run by Claudia Rothermere and David Nelson, “WM Trust”, bought The Garden House, also on the Ferne Park estate, for £3m, although documents suggest it entered the Rothermere property empire around the same time as Ferne Park Cottage a decade earlier. Ferne House and Ferne Park themselves, worth upwards of £50m, are registered in Lord and Lady Rothermere’s names but again this appears to be as trustees of a trust and “care of Dixon Wilson”, ie David Nelson. There is no mortgage against this property, but when in 2006 Rothermere added new east and west wings to Ferne House he did use £50m worth of DMGT shares held by his Bermuda vehicle Rothermere Continuation Ltd as security for a loan (without properly declaring the matter to the stock market).

Thus, with the help of an accountant who specialises in “offshore trusts and the UK resident who has retained a foreign domicile”, the proprietor of the newspaper that judges who does and doesn’t love Britain also enjoys one of its richest and most tax-avoiding property portfolios.

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