Tony and Cherie Blair saved hundreds of thousands of pounds in property taxes when acquiring a London office building from an offshore company partially owned by a prominent Bahraini minister.
The former British prime minister and his wife became the owners of a £6.5m office building in 2017 by acquiring a British Virgin Islands (BVI) company controlled by the family of HE Zayed bin Rashid Alzayani, the constitutional monarchy’s current minister for industry, commerce and tourism.
The deal is revealed in the Pandora papers, a trove of leaked offshore documents. They reveal Alzayani as the secret shareholder of another offshore firm that has spent more than £60m buying UK commercial property over the past nine years, including the Marylebone address sold to the Blairs.
The tax saving was made because the Blairs acquired the property’s holding company – not the building directly – meaning they did not have to pay about £312,000 in stamp duty.
While there was nothing illegal about the transaction, and there is no evidence the Blairs proactively sought to avoid stamp duty, the deal highlights a loophole that has enabled wealthy property owners not to pay a tax that is commonplace for many ordinary property buyers in the UK.
Robert Palmer, the executive director of Tax Justice UK, said: “It is unfair that if you buy a company that owns a property then you don’t have to pay stamp duty. These are loopholes that are available to wealthy people but not available to others. Politicians need to fix the tax system so that everyone pays their fair share.”
Stamp duty is paid by buyers of commercial and residential properties selling at values above £150,000 and £125,000 respectively. The average price of a house in the UK was £244,229 in July, according to the building society Nationwide.
Four years ago, the Blairs acquired 30 Harcourt Street, a former townhouse just to the north of Mayfair in central London, with Cherie Blair moving her government advisory firm, Omnia Strategy, into the four-floor building.
There was no secrecy at the time about the transaction, which was reported by the press. However, the identity of the seller – and the structure of the transaction that meant stamp duty was not due – were not known, and can only be revealed courtesy of files in the Pandora papers.
Four months prior to the purchase, the Blairs formed a UK company called Harcourt Ventures, in which they both held a 50% stake and which was registered for VAT. Their new company then acquired the shares in Romanstone, the Alzayani family business that owned 30 Harcourt Street, which was a wholly owned subsidiary of their property group Riverton Capital.
The Blairs then dissolved Romanstone inside Harcourt Ventures, leaving 30 Harcourt Street directly owned by their own firm. Cherie Blair told the Guardian there was “nothing unusual or underhand in any of this” and that she did not know the identity of the sellers before entering into the transaction.
The Alzayanis did not want to sell the building separately from their BVI company, she said, and added: “I did not want to be the owner of a BVI company and so instructed my accountants, BDO, and solicitors, Blake Morgan, to ensure that I could repatriate the company and the building to the UK.
“All the arrangements were made for the express purpose of bringing the company and the building back into the UK tax and regulatory regime, where it has remained ever since. All taxes have been paid ever since and all accounts openly filed in accordance with the law.”
Had Harcourt Ventures acquired the building directly, the Blairs would have faced a stamp duty bill of about £312,000.
Richard Kleiner, managing partner of the City accounting firm Gerald Edelman, said: “If the Blairs’ company Harcourt Ventures had directly acquired the property then stamp duty land tax of up to 5% would have been payable on the purchase. However, they acquired the shares in the BVI company that owned the property, which would not have attracted any stamp duty.”
While they saved money when they purchased the property, the Guardian understands it is possible the structure could leave the Blairs with a higher tax bill in the future, but only if they decide to sell the building.
Lawyers for Riverton Capital said: “Prior to 6 April 2019 non-residents disposing of interests in commercial properties were not liable to pay capital gains tax. Many companies, families and investors used this type of lawful structure after obtaining professional advice, which is the case here.
“The companies have complied with all UK laws past and present. The minister referred to in the email is one of several beneficiaries of the companies.”
