HM THE QUEEN AND HRH THE PRINCE OF WALES: ARRANGEMENTS FOR PAYING TAX AND REFUNDING PARLIAMENTARY ANNUITIES FROM 1993
1. Following the Prime Minister's announcement in Parliament on 26 November 1992 (OR Cols 982-3) the Royal Trustees considered that it might be helpful, now that detailed proposals have been finalised, to lay a report before the House. The report deals with The Queen's offer to pay income tax, capital gains tax and inheritance tax on a voluntary basis and to refund the cost of the Parliamentary Annuities paid to members of the Royal Family except for Queen Elizabeth The Queen Mother and The Duke of Edinburgh. The report also covers The Prince of Wales' offer to pay income tax on a voluntary basis on his income from the Duchy of Cornwall. He is already fully taxed in all other respects.
Taxation
2. The Sovereign is not legally liable to pay income tax, capital gains tax or inheritance tax because the relevant enactments do not apply to the Crown. After income tax was reintroduced in 1842 some income tax was paid voluntarily by the Sovereign, but over a long period these payments were gradually phased out.
3. The Queen has now proposed that She should pay income and capital gains tax, on a voluntary basis, and that inheritance tax should also be paid voluntarily, to the extent described in paragraphs 8-9 below, on transfers of Her assets. The Prince of Wales also wishes to pay tax voluntarily on his income from the Duchy of Cornwall to which Crown exemption also applies. They propose that these arrangements should come into effect from 6 April 1993. The main features of the proposed tax arrangements are described in this Report. The Memorandum of Understanding (at Annex A) gives full details.
Income Tax
4. Tax will be paid on all private sources of income such as investment income and farming profits.
5. Tax will also be paid on The Queen's Privy Purse income to the extent that the income is used for personal purposes.
6. No account will be taken of the Civil List, of the Grant-in-Aid provided to meet property services expenditure, or of the cost of facilities and services borne on the Votes of Government Departments, since these are provided by Parliament to meet official expenses and to provide facilities for the performance of official business, and are not personal remuneration.
Capital Gains Tax
7. The arrangements provide for capital gains tax to be paid from 6 April 1993 on any gains from the disposal of private assets on or after that date. The private proportion of capital gains in the Privy Purse will also be taxed. For assets acquired before 6 April 1993 only the proportion of any gain or loss relating to the period from 6 April 1993 will be taken into account.
Inheritance Tax
8. Some assets are held by The Queen as Sovereign rather than as a private individual. They are not sold to provide income or capital for the personal use of The Queen and pass from one Sovereign to the next. Official residences, such as Buckingham Palace, and the Royal Collection of paintings and other works of art fall into this category. It would clearly be inappropriate for inheritance tax to be paid in respect of such assets.
9. In relation to assets which can properly be regarded as private, the arrangements provide that inheritance tax will not be paid on gifts or bequests from one Sovereign to the next, but will be payable on gifts and bequests to anyone else. Tax will also not be payable on assets passing to the Sovereign on the death of a consort of a former Sovereign. The reasons for not taxing assets passing to the next Sovereign are that private assets such as Sandringham and Balmoral have official as well as private use, and that the Monarchy as an institution needs sufficient private resources to enable it to continue to perform its traditional role in national life, and to have a degree of financial independence from the Government of the day.
The Prince of Wales
10. Crown exemption also applies to the income which The Prince of Wales receives from the Duchy of Cornwall, but he pays a voluntary contribution to the Exchequer of 25% of the gross income received. He proposes that, from 6 April 1993, he should instead voluntarily pay income tax on that part of the Duchy income which is used to meet personal expenditure. As noted in paragraph 1 above he is already fully taxable in all other respects.
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