Following up from my last post, I caught the discussion on Radio 4’s PM yesterday, which didn’t really seem to add much to the debate.
One thing which caught my ear though: Richard Murphy was adamant that the Duchy ought to be paying capital gains tax on property disposals, as all other property trading businesses would do so. This is clearly wrong: a property business might pay CGT, but a property trading business would not: any disposals in the way of trade would be subject to income tax. I don’t know anything like enough about the Duchy’s affairs to determine whether it’s trading or not, but the bigger a business is the more likely it is to be trading.
In addition, CGT is levied at lower rates than income tax. So this point about CGT parallels the point about corporation tax: people are complaining that the Duchy isn’t paying 24% or 28% tax, and completely overlooking that fact that any income taxable at those rates would escape income tax at 50%.
The other point Murphy made was that the effective tax rate the Prince pays is around 25%, not 50%. Quite apart from the fact that this is about what you’d pay in corporation tax or CGT, if one were to recategorise the Duchy as a corporation or all the income as gains, this seems to be of income before deductions. Determining what costs should be allowable in this sort of area is always going to be horribly complicated, but it would seem odd to say that nothing would be deductible. After all, if you only get income because you’re heir to the throne, then surely the costs of acting in that capacity should be deductible from that income?
I haven’t had a chance to go through the PAC sssion yet – I’ll probably have to wait for the transcript, as I don’t really have time to watch the whole thing at the moment.
One thing which has come out is this bizarre idea that anything which makes income from investments must be a corporation. I know partnership taxation is under review at the moment, but that seems like a major step!