Q121 Chairman: How can I become an offshore company then?
Mr Hartnett: Set one up.
Q122 Chairman: I am a bit fed up with paying taxes as well.
Mr Hartnett: Let me try to unpick it a little for you. Some of the Mapeley group of companies are actually onshore in the UK but the investment is offshore. Holding property in an offshore entity like this has been a common feature of property ownership in the United Kingdom for many, many years. Personally the first time I saw this as a tax inspector was 25 years ago and I did just check this morning the figure that Ms Strathie came out with which is that 82% of commercial property-I think it was last year-in London was held in an offshore structure. Whilst I cannot, for reasons we are all aware of, say anything about our advice to ministers, successive governments have looked at this on a number of occasions. That is how property is held. If I may, as someone who was around when the contract was made, the thing I regret most is that those working on that contract took legal advice and were told that tax planning, tax avoidance of this sort, was not a reason not to go into the contract and it is a matter of history that the Board of Inland Revenue at the last minute and the Board of Customs afterwards learned that.
Q123 Chairman: That is one thing we find very difficult to understand. How could you just learn this at the last minute? You seem to be giving the impression that this is quite common.
Mr Hartnett: It is very common.
Ms Strathie: It is common.
Chairman: It is very common so you would have suspected, you as a serious department, full of very bright people, that this might have been the case, but it seems not.
Q124 Mr Davidson: I take it Mr Friedlos did not point this out to them during the negotiations.
Mr Friedlos: They were aware of it during the negotiations.
Mr Hartnett: Absolutely.
Q125 Mr Bacon: The Report says that the Revenue was but at the point of contract signature the Board of Customs and Excise was not.
Mr Hartnett: I think the record from previous hearings says that the Board of Customs and Excise did not know at the point of signature. The Board of Inland Revenue learned four days before signature and legal advice was obtained from senior counsel in those four days.
Q126 Mr Bacon: From whom did they learn this? Who told them? Was it you?
Mr Hartnett: It was.
Q127 Mr Bacon: What was their reaction?
Mr Hartnett: What happened-and this is going back in a history a little bit-is that the Chairman of the Board of Inland Revenue was not available to sign the contract.
Q128 Mr Bacon: Was this Mr Varney?
Mr Hartnett: No, Sir Nicholas Montagu.
Q129 Chairman: Sir Nicholas Montagu was not available.
Mr Hartnett: Not available because the contract signing was delayed. I as a commissioner was asked to sign in his place and I asked what structure we were selling into. That is when the Board of Inland Revenue learnt.
Q130 Mr Bacon: It rather reminds me of a story told by a parliamentary colleague of mine who signed the Maastricht Treaty because Norman Lamont was very conveniently not around on the day. I have one question about this 82% figure. You are saying that 82% of commercial property in the United Kingdom is owned through the structure.
Ms Strathie: In London.
Mr Hartnett: In London.