MEMORANDUM OF UNDERSTANDING
ON ROYAL TAXATION
Introduction
1. The Queen currently does not pay income tax, capital gains tax or inheritance tax, but has graciously agreed to do so from 6 April 1993, on a voluntary basis, in accordance with the arrangements set out in this Memorandum of Understanding. The Prince of Wales has confirmed that he intends to pay tax on the same basis following his accession to the Throne.
2. At present, The Prince of Wales is liable to tax, except on the income he receives from the Duchy of Cornwall. In respect of that income he makes a voluntary contribution of 25% to the Exchequer. He has voluntarily agreed to pay income tax from 6 April 1993 on Duchy of Cornwall income used for private purposes in place of the present 25% contribution.
Summary of main provisions
3. The memorandum makes provision for:
income tax and capital gains tax to be paid in respect of the whole of The Queen's private income and assets in accordance with normal tax rules (apart from transitional commencement provisions)
income tax and capital gains tax to be paid in addition on the proportion of the income and capital gains of the Privy Purse (which is partly funded by income from the Duchy of Lancaster) used for private purposes, and includes rules for calculating the private proportion which is to be taxed
monies and facilities provided for The Queen out of public funds for “Head of State” duties to be disregarded for income tax purposes
inheritance tax to be paid on The Queen's assets, but without regard to those which pass to the next Sovereign, whether automatically or by gift or bequest
The Prince of Wales to pay income tax on income from the Duchy of Cornwall used for private purposes, and includes rules for calculating the private proportion which is to be taxed
the same tax arrangements expected to apply to The Prince of Wales, following his accession, as will apply to The Queen
The Queen and The Prince of Wales to have the same privacy and confidentiality as other taxpayers
the payment of tax and other administrative matters
the arrangements to continue indefinitely, but for termination or variation in changed circumstances.
Income tax
4. These arrangements apply to The Queen's income arising on or after 6 April 1993.
5. Income tax will be paid, on private income, in accordance with ordinary income tax rules, subject to the provisions of paragraphs 7 to 14 below.
Definition of private income which is to be taxed
6. Income tax will be paid on all private sources of income.
7. In addition, income tax will be paid on the income of the Privy Purse (which includes income received from the Duchy of Lancaster) to the extent that it is not used to defray expenditure in connection with the official duties of The Queen or members of the Royal Family who undertake official duties on behalf of The Queen. The amount of Privy Purse income to be taxed and the expenses taken into account are to be determined in the way set out in Appendix A.
8. At present The Queen derives no income from the Duchy of Cornwall. But the Sovereign is entitled to that income at any time when there is no Duke of Cornwall, and to eight ninths of that income when the Duke is a minor. In that event Duchy of Cornwall income is used first to meet Civil List expenditure and payments by the Exchequer for the Civil List are reduced accordingly. Only the excess, if any, of the Duchy of Cornwall income over the Civil List expenditure would be at the Sovereign's disposal. If at any time there is such an excess, it will be taken into account
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