Editor: The fact that local authorities have purchased commercial property through offshore vehicles should come as no surprise, and it is difficult to understand why they should be criticised for using perfectly legal means to reduce their purchasing costs, whatever their source of finance.
The use of offshore vehicles is a practice that has been adopted in the UK for many years and which, as I know from personal experience, arose as a result of the hikes in the rate of stamp duty to 4% in the early 1990s. Until that time, the government had maintained the rate at 1%.
A 4% levy on the large capital sums involved resulted in it becoming cost-effective to set up and administer offshore vehicles, enabling the tax to be avoided. Prior to that time, most investors accepted that they had to pay 1% stamp duty on completion and allowed for that in their financial calculations. The use of offshore vehicles was not worth the cost or the administrative hassle.
There is a simple solution to the tax avoidance issue: reduce stamp duty to 1%. The likely consequences are that there would no longer be an advantage in setting up offshore vehicles and the Treasury would receive 1% of the value of many of the UK’s commercial property transactions – a not-insignificant sum.
After all, receiving 1% of something is better than not receiving anything at all.
Andrew J Martin