House of Secrets: Who Owns London's Most Expensive Mansion? | Hacker News Reader

House of Secrets: Who Owns London's Most Expensive Mansion?

newyorker.com

47 pointsbenbreen20 comments

It's not unusual for wealthy foreigners to own expensive real estate in large, stable cities. The most expensive buildings in New York City, with beautiful views of Central Park etc., have, surprisingly, many absent owners. Overseas billionaires use investments in cities like New York and Sidney as places to safely park their millions outside of their own countries. I would imagine that London is likewise a perfect place to do this.

Whenever I walk in Central Park in the evening, I pay attention to how many windows of adjoining buildings have their lights on, as a rough proxy of current occupancy. Billionaire-class buildings like 15CPW, One57, etc. are often 80% dark. On a holiday weekend like today (it’s considered lame to be stuck in the city -- you need to be in the Hamptons or wherever), they can be completely dark. I’ll go check in a while. My building on the other hand will be lit up like a Christmas tree.

I wonder if there's a cool data science project here. On a repeat basis: take a picture at night, do some basic CV on it, and output an occupancy rate. Might be interesting for some of the luxury buildings you've noticed.

Maybe scrape public webcams for images, if there are any usable ones at nearby landmarks etc.

Same with works of art, classic cars, illegal antiquities and golden potatoes. All kept rather than volatile, traceable money.

Throw in a femme fatale and a couple of murders and this would make a great film - even the name, Witanhurst, has a lovely sort of gothic noirness to it.

This was a really enjoyable read.

Spoiler - it's a secret because someone is evading tax, hiding mafia money, or money they gained through corruption. It's a shame but unsurprising the investigator is a journalist rather than the British police or revenue service.

I think the core point here is that they're not evading British taxes - it quotes a tax bill of many millions of pounds...

because it's registered in the name of an off-shore company? pretty much any HNWI doesn't bank in high tax jurisdictions so yeah they're all tax evaders. the richer you get the less tax you pay.

I wouldn't judge that too quickly - it could well be about hiding money stolen from another country: http://www.independent.co.uk/news/uk/home-news/london-proper...

So that's fine then?!

Up until last summer (when the Government won a case letting them change the law), having your expensive house owned by an offshore corporation was the canonical way to avoid a particular type of UK tax called Stamp Duty.

When you buy a property, you have to pay Stamp Duty [1] on the value it's sold at. Stamp Duty uses marginal tax brackets, and the highest one (for the portion of the transaction over £1.5M), is 12%...so it adds up if you're buying a large house.

Given that the tax rate for buying "shares in a foreign company that has a share register in the UK" is a flat 0.5%, the scheme was that you set up the house as the only asset of an offshore corporation registered in the UK, and instead of selling someone the house, you sell them the shares of the corporation. The buyer can now inhabit the house at their leisure (since they own the company that owns it), but the direct ownership of the house didn't change - so no Stamp Duty was triggered.

There are likely other tax benefits to having your expensive house owned by a numbered corporation, but Stamp Duty is/was a significant one.

[1] https://www.gov.uk/stamp-duty-land-tax/overview

Even with the new taxes, people were/are still purchasing through foreign companies (that way, you avoid the 0.5% stamp duty when the shares are sold?).

They do have to pay the Annual Tax on Enveloped Dwellings (ATED) then though, which is basically an annual tax that needs to be paid when a corporate entity (i.e not a person or a trust) owns a property.

Very true, but ATED is cheap.

On a (for example) £7M house you would have paid £750K Stamp Duty, or if sold though a corporate transfer, £35K of tax on the shares and £36K/yr ATED - so holding it for less than twenty years would have been a deal, assuming no other possible savings from the corporate option.

Probably, yeah.

Even though this law should dissuade people from buying through corporate vehicles, all the existing housing stock (i.e. probably nearly all the property in Kensington & Chelsea, Knightsbridge, Belgravia, etc that is from the 1700-1900s) that is worth holding through SPVs is already held through SPVs, and will not be captured by this change.

Developers usually split up their new buildings in separate entities before they build anything, because I believe only stamp duty is payable on the land then. Instead of then selling the property, they sell the shares, which is taxed as capital gains (instead of corporate income) for them. Good times in the luxury market, since share sales in corporate vehicles tend to be tax free.

It's still very much a win-win situation for both seller and buyer (probably much less for new developments after this change), so no reason not to do it. I don't think this will raise significant amounts of tax any time soon. :)

A. Because someone wants to keep their ownership of an asset private does not mean they are doing something nefarious

B. That said, the quote "behind every great fortune is a great crime" does come to mind

I grew up not far from there, used to look at it looking over the Heath, falling down, like the ruins of Bishops Avenue [1], one of the most expensive street in London.

[1] http://www.theguardian.com/society/2014/jan/31/inside-london...

Some points:

1. It is not uncommon for some of the most expensive properties in London to have "mostly absentee owners, hiding behind offshore corporations based in tax havens". [0]

2. Highgate does have associations with wealthy Russians, perhaps due to the presence of the Russian Trade Delegation building, and that has sometimes led to friction with locals. See also Terry Jones's "Trouble on the Heath". [1]

3. The pub associated with Dick Turpin is the Spaniards Inn [2] (The Flask is on the other side of the Heath).

[0] http://www.vanityfair.com/style/society/2013/04/mysterious-r...

[1] https://books.google.co.uk/books/about/Trouble_on_the_Heath....

[2] http://en.wikipedia.org/wiki/Spaniards_Inn

The Queen?

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