Q131 Mr Bacon: If I am on the continent and I fly in over London and see all of London laid out before me as you do on a sunny day, roughly 820 out of every 1,000 office buildings are owned in this type of way.
Mr Hartnett: Transactions in one year. I referred to the year before last but is has been prevalent-
Q132 Mr Bacon: But if it has been like that for 25 years then typically-you only have to go round the City of London to see how often holes are being dug and offices are being rebuilt-it would be fair to say that the vast majority of buildings you fly over and look at which are commercial property buildings in London are owned in this type of way; that is what you are saying.
Mr Hartnett: Yes.
Q133 Mr Davidson: So if I flew into Hamilton in Bermuda I would be able to look out of the window and say "I can see the nameplates of 82% of the property in London down there".
Ms Strathie: They are not necessarily all in Bermuda.
Q134 Mr Bacon: If that is the case that 820 out of every 1,000 commercial buildings are owned in this type of structure, I would not wish to incite you into suggesting what advice you might give to ministers as you just mentioned but has it occurred to anyone that the reason for this might be that the environment here from a tax point of view for commercial property is so unattractive that it causes this to be the case and that a slightly different environment might encourage them all to come back onshore?
Mr Hartnett: I do not know the answer to that question. There has been a lot of analysis by various policy teams over the years on this tax issue but it is as it still is.
Q135 Mr Bacon: What proportion of public sector buildings are owned in this way?
Mr Hartnett: I do not know the answer to that question.
Q136 Mr Bacon: Can you find out and let us know?
Mr Hartnett: I am not sure we can but we will try11
Q137 Chairman: As a result of using an offshore company how much tax have you lost?
Mr Hartnett: We think at the moment-and it is a best estimate-that so far £2.5 to £3.5 million of capital gains tax that might have been paid in different circumstances has not been paid.
Q138 Mr Davidson: But the estimate is still that it would be £55 million over the period of the contract.
Mr Hartnett: If I may, it is worth going back to the last NAO Report and just one line "The location of Mapeley STEPS Limited in Bermuda has no material effect on the overall value for money of this deal to the UK taxpayer". That was the NAO conclusion then.
Mr Morse: Just to make sure I have understood this, you think the tax liability that might have arisen would have been on the HMRC estate, the amount you mentioned, the £200 million.
Mr Hartnett: No, £2.5 to £3.5 million.
Mr Morse: Just out of curiosity and I am not entitled to ask questions but if I might be indulged in this one thing, Chairman, looking at all of that estate how much tax are we losing to the UK Exchequer by not having it onshore?
Mr Hartnett: Capital gains tax or corporation tax will not be paid by an offshore company when it disposes of the property. The property market has been pretty volatile during the life of this contract and it would be interesting, when we get to look at all the details, to see losses and gains but our best estimate if £2.5 to £3.5 million has been lost, if that is the right word, so far.
Q139 Chairman: Mr Hartnett, Ms Strathie, Mr Friedlos that concludes our hearing which has been very interesting. Whatever tax has been lost clearly the reputational damage to your Department has been great and lessons will have to be learned for the future. It is not just the reputational damage which has been caused, in our Report we will express concern about the fact that you have no detailed plan for vacating properties and we will obviously want to return to this question of value for money, we will want to stress the fact that you paid £300 million more than you planned and the overspend is expected to rise to £570 million by the end of the contract. I am afraid that this will not be one of your finest calls. Do you want one last comment?
Ms Strathie: We welcome the NAO Report and thank you for the hearing.
Chairman: Thank you very much; that concludes our hearing.
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