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Tory MP uses off-shore Company to buy second home

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Tory MP uses off-shore Company to buy second home

Post  Panda on Sat 2 Nov - 14:12

Stephen Hammond: Conservative minister's offshore deal cuts tax bill

Conservative minister Stephen Hammond used an offshore company to buy his second home, allowing him to cut his tax bill

Revealed: Conservative minister Stephen Hammond used an offshore company to buy his second home, allowing him to cut his tax bill

Stephen Hammond and his wife Sally at an event in London earlier this year Photo: ANDREW PARSONS/i-IMAGES

By Holly Watt, Claire Newell and Ben Bryant

10:00PM GMT 01 Nov 2013

A Conservative minister used an offshore company to buy his second home, allowing him to cut his tax bill, it can be disclosed.

Stephen Hammond used a company based in Gibraltar, before it moved to Delaware, to buy his family’s £500,000 villa in Portugal.

By not owning the villa directly, in his own name, he was able to reduce his tax bill in both Britain and Portugal.

A senior tax expert said on Friday night that Mr Hammond, a transport minister, would have been able to avoid a “big hit of capital gains tax”.

The disclosure will embarrass senior Conservatives, who have criticised the use of offshore tax shelters. David Cameron described legal tax havens as “morally wrong”.

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In his Budget speech last year, George Osborne said legal but aggressive tax avoidance was “morally repugnant”.

Buying homes through a company to avoid the tax was “unacceptable”, he said. He pledged to “come down on that practice like a ton of bricks”.

Mr Hammond is understood to have bought a villa in Algarve through a company called Peal Gas Ltd.

On Friday night, Mr Hammond admitted that he was behind the offshore firm that owns the family’s second home.

A spokesman for Mr Hammond said in a statement: “Mr Hammond has always paid the correct amount of tax in the UK. Mr Hammond has had no personal tax liability overseas.”

Peal Gas was set up in Gibraltar in April 1997. Mr Hammond bought the company, which already owned the property, in 2002.

In 2005, Portugal changed its tax rules so that the annual property tax for homes owned through companies registered in Gibraltar rose to five per cent, in an attempt to reduce the number of holiday homes held offshore in this way.

Had Mr Hammond simply transferred the property into his own name at this point he would have been liable for capital gains tax on the increase on the value of the property since it would technically have been classed as a sale.

Instead, in December 2005, he moved the company to Delaware, a US state not covered by the Portuguese rules.

Experts estimate this decision could have saved him about £20,000 in British tax because such villas rose in value by about £100,000 during this period.

Gary Heynes, a partner at Baker Tilly, the business advisers, said transferring Portuguese property to Delaware companies was common in 2005.

“The history of Delaware companies and Portugal goes back six to eight years,” said Mr Heynes.

“Originally, the properties were held in Gibraltar companies to pay lower property taxes.

“Then Portugal tried to close that loophole and blacklisted those companies. People then moved the properties to Delaware or Malta, because they had not been blacklisted.

“If you took the property out of the company, you would have to pay capital gains tax in this country, which is why people took a small hit of setting up a Delaware company rather than the big hit of capital gains tax.”

Peal Gas was registered in Gibraltar, until the new company was set up in Delaware. The company’s registered agent is the Corporation Trust Company in Wilmington, the legal address of more than 285,000 separate businesses. This is thought to have allowed Mr Hammond to avoid capital gains tax in Britain, which would be levied at 28 per cent.

The Labour MP Yasmin Qureshi said Mr Cameron should look closely at Mr Hammond’s tax arrangements.

“Just days ago David Cameron said it was important we get our house in order on tax avoidance,” she said. “If there are questions to answer over one of his minister’s own tax affairs, maybe the Prime Minister should start looking a little closer to home.

“With each day that goes by it’s increasingly obvious that this is a Prime Minister who stands up only for a privileged few.”

The villa in Vale do Lobo has a large pool. It is described on property rental sites as “a well presented and tastefully decorated four bedroom detached villa”.

“Entrance to the property is through double iron gates on to a cobbled driveway flanked by lawns and trees,” one site says.

It costs as much as £2,425 a week to rent in the summer. The villa is next to a popular golf course and close to a beach.

Portugal was hit hard by the economic meltdown and was forced to request an emergency bail-out from the European Union in 2011. Britain contributed to the €78 billion bail-out through the European financial stability mechanism.

Mr Hammond has been the MP for Wimbledon since 2005. He employs his wife, Sally, as his office manager, paying her £45,000 a year from taxpayer funds.

He became a minister in the reshuffle in September last year.

The issue is likely to renew calls for ministers to publish their tax returns.

In 2012, Mr Cameron said he was “very relaxed” about publishing his tax returns and believes the “time is coming” for politicians to be more open about their finances. There has been no change to the rules.

Mr Hammond lists his Peal Gas shareholding in his register of interests as an MP. However, there was no mention of it in the ministerial register of interests.
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