Tax experts from PricewaterhouseCoopers created a seven-tier, international corporate structure which MPs allege was designed to avoid UK tax on six of London's best known office blocks bought for £670m.
The UK headquarters of IBM on the South Bank and JP Morgan's former home in the City of London were among six buildings acquired by the European real estate arm of US private equity group Carlyle three years ago. The portfolio of properties, known as Project White Tower, had been snapped up after its former owner, Mayfair property tycoon Simon Halabi, was declared bankrupt.
Margaret Hodge, chair of parliament's public accounts committee, has described the PwC document as outlining "the most complex company structure, an extraordinary structure ... to avoid tax".
Asked if the complex structure proposed by PwC tax experts — and leaked to Hodge — had been adopted, Carlyle refused to comment. A spokeswoman said: "All due tax from rental income on these properties has been paid in January 2013." PwC, meanwhile, said it could not comment on advice to a client.
Other properties in White Tower include Ludgate House, the South Bank headquarters of United Business Media and former home of the Daily Express, and Millennium Bridge House, the home of FTSE 100 financial services firm Old Mutual on the north bank of the river opposite the Tate Modern.
In February Hodge told PwC's head of tax, Kevin Nicholson, that she was shocked by the structure of ownership set out in the PwC document and waved the document at the committee hearing. A diagram of inter-connected companies showed vehicles in Jersey, Luxembourg and Delaware. Hodge said to Nicholson: "The whole purpose of the complexity of these structures is to – in your words – minimise tax, in my words avoid tax, isn't it?" The PwC tax boss said he did not know the structure and could not comment.
Nicholson, who had worked as a tax inspector for HMRC in the early 1990s, did concede that PwC sometimes drew up complex proposals involving low-tax jurisdictions for the purpose of minimising tax. "It will be one of the things taken into account," he said
Tax advisers in Britain are required to report any tailored tax avoidance schemes that they offer clients to HMRC, so that the taxman can review them. However, multinational tax firms can use offices in other jurisdictions to offer the advice without a requirement to notify HMRC.
Prem Sikka, professor of accounting at the University of Essex, said: "These really complex corporate structures would involve many man-hours, as well as negotiations with other governments, for the tax authorities to penetrate in order to track the transaction."The deal to buy the six office blocks, two of which were sold on by Carlyle, was led by its European real estate managing director Robert Hodges, who was advised on the deal by Herbert Smith, Société Générale, PwC, GVA Grimley and offshore legal experts Ogiers. After the acquisition was announced Hodges was named "Private Equity Real Estate Europe Industry Figure of the Year".
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