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Owner avoided taxes on shopping centres

From BBC - November 7, 2017

Private equity firm Blackstone avoided tens of millions of pounds in UK taxes on property deals in Glasgow and London, the Paradise Papers show.

The documents reveal it used offshore companies to purchase and operate the St Enoch Shopping Centre in Glasgow and Chiswick Business Park in London.

The papers show how accountancy firms mapped out strategies to minimise or avoid every significant tax.

Blackstone said its investments were "wholly compliant with UK tax laws".

Paradise Papers - Tax secrets of the ultra-rich

Property deals

Blackstone is one of the world's biggest private equity groups and its founder and chief executive Stephen Schwarzman is a close confidant of President Trump.

Leaked documents from the offshore law firm Appleby, seen by BBC Scotland, show for the first time how the group structured two major UK property deals.

Top accountancy firms issued long documents to Blackstone outlining how it could use trusts in the tax haven of Jersey and a complex structure of companies in Luxembourg for the purchase of both Chiswick Park and the St Enoch Centre.

There is no suggestion that the plans were illegal but campaigners the Tax Justice Network described the structures Blackstone used as an "economic fiction".

They told the BBC it was clear from the data in the papers that the principal purpose of the structures, which are virtually identical, was to avoid tax.

'Losing revenue'

US tax expert Reuven Avi-Yonah, from the University of Michigan law school, said the documents gave a "rare" insight into company structures that even tax authorities did not often see.

"If HMRC becomes aware of the fact that this is a common type of structuring then they are more likely to challenge it because they will be aware they are losing a lot of revenue," he said.

Chiswick Park

Blackstone purchased Chiswick Park, a 33-acre office development in west London, in 2011 for 480m.

The majority of the site, which hosts the UK headquarters of companies such as Pokemon, Avon and shopping channel QVC, was sold to the Chinese government for 780m in 2014.

The data suggests Blackstone's tax structures allowed it to avoid about 19m in stamp duty on the purchase.

The tax structure also meant it could avoid tax of up to 30m annual rental income and capital gains tax on the sale of the business park, which could have been tens of millions of pounds.

St Enoch Centre

In 2013, the private equity giant also bought the St Enoch Centre in Glasgow, a large city centre shopping complex housing almost 100 stores, for about 190m.

Documents show it would have avoided stamp duty of 7.6m and corporate tax on up to 10m annual rental income.

Source document

Virtually identical

Both the St Enoch Centre, which Blackstone still owns, and Chiswick Park were already held in property trusts known as JPUTs, in the tax haven of Jersey, when it bought them.

This allowed the firm to purchase the properties without paying millions of pounds in UK stamp duty.

George Turner, from the Tax Justice Network, told the BBC: "What they are doing is buying into the trust so when the original owners sold the property to Blackstone, then they were not selling the property itself.

"They were selling an interest in the trust that owns the property and because that trust is owned offshore, they can avoid stamp duty."

Under the tax structure revealed in the leaked documents, the Jersey trusts were owned and funded by a series of companies that Blackstone registered in Luxembourg.

Money for the purchase of the properties was filtered through the Luxembourg companies from central Blackstone funds in the form of inter-company loans.

Inter-company loans

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