MPs challenge tax exemptions for Prince’s Duchy of Cornwall estate

Prince Charles has been dragged into the parliamentary campaign against tax avoidance after a powerful committee of MPs questioned whether tax exemptions enjoyed by his £700 million Duchy of Cornwall could still be justified.

Margaret Hodge, chairman of the Public Accounts Committee, has demanded answers from ministers regarding the arrangements under which the hereditary estate does not pay corporation tax or capital gains tax.

Prince Charles' income in 2012 was £20.48 million with £18.28 million coming from the Duchy of Cornwall and another £2.19 million from Government departments and grants-in-aid.

While exempt from corporation tax and capital gains tax, Prince Charles voluntarily paid £4,496,000 in income tax.

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The committee, which last year investigated tax avoidance by internet giants Google and Amazon and coffee chain Starbucks, said it had taken the step after more than 30 MPs and members of the public complained about the Duchy's tax status.

Mrs Hodge revealed she had written to the financial secretary to the Treasury stating that "in view of the committee's and the public's concern on this matter" he should clarify "why the tax treatment of the Duchy remains defensible".

Mrs Hodge said: "A lot of the work we are doing is around tax collection and this is another element the taxpayer has an interest in.

"Taxpayers are concerned that everyone pays their fair share."

One committee source told The Guardian that a full inquiry is likely to be launched into the issue.

In all the Duchy of Cornwall owns some 131,000 acres of land in 23 counties, including large swathes of Cornwall, Dartmoor and the Prince's Gloucestershire home of Highgrove.

It has business interests in commercial and residential property as well as renting farmland.

The Public Accounts Committee also wants the Treasury to explain "the impact of this favourable tax position on the Duchy's competitive position in … markets in which it operates".

If made subject to corporation and capital gains tax, the annual surplus from the Duchy of Cornwall estate which is paid to the Prince for his private and official spending would be reduced dramatically.

The Duchy asserts that the estate is "not a separate legal entity for tax purposes" allowing Charles to use its gross profits to subsidise his spending.

Clarence House strongly denies any suggestion of tax avoidance.

A Clarence House spokesman said: "The Duchy is not a company and is not therefore liable to pay corporation tax.

"The Prince voluntarily pays income tax on income generated by the Duchy. Should the Prince pay corporation tax as well, this would result in double taxation."

The Prince's spokesman explained that the Duchy of Cornwall was exempt from capital gains tax, saying Prince Charles was not entitled to capital gains and therefore it would not be appropriate for him to pay.

A campaign group advocating for an elected head of state said it welcomed the committee's questions of the Duchy's tax status.

The anti-monarchy group Republic has previously called for the Duchy of Cornwall to be scrapped entirely, describing it as "arcane, archaic and unfair".

Graham Smith, chief executive of Republic, said: "There is no justification for the Duchy to be avoiding this tax.

"The Duchy is a trading body and major land owner. Like all other trading bodies it should pay its fair share of tax.

"Instead it keeps ducking and diving, changing its excuses each time in a desperate bid to justify its position.

"It is time this well- entrenched tax avoidance scheme was closed down by the Treasury and the Royals were told they can no longer enjoy privileged tax status."