The developers bill it as the most "exclusive address in the world", where the globe's super-rich can pay £85m for an apartment.
For that kind of price tag the residents of One Hyde Park, the Knightsbridge apartment block developed by Candy brothers Christian and Nick, gain access not just to lavish rooms, but also to a "21m stainless steel ozone swimming pool", a "fully-equipped state-of-the-art gymnasium" and a "virtual games room with golf simulator". The whole opulent package is meant to justify the development's tag-line of "experience the exceptional".
The rich and famous who bought one of these apartments faced something quite exceptional on Wednesday: a British Conservative chancellor aiming aggressive blows directly at them and their kin.
Starting on Thursday, the stamp duty paid on UK properties sold for more than £2m will rise to 7% from 5% – from £100,000 to £140,000 – George Osborne said in his budget speech. He then outlined how the Treasury would no longer tolerate a group of super-rich buyers who routinely dodge the charge by making their property purchase through an overseas company rather than in their own name.
"If you buy a property in Britain that is used for residential purposes, then we will expect stamp duty to be paid," he said. "I will not hesitate to move swiftly without notice and retrospectively if inappropriate ways around these new rules are found."
Osborne added: "A major source of abuse – and one that rouses the anger of many of our citizens – is the way some people avoid the stamp duty that the rest of the population pays, including by using companies to buy expensive residential property. I have given plenty of public warnings that this abuse should stop. Now I'm taking action. I am increasing the stamp duty land tax charge applied to residential properties over £2m brought into a corporate envelope. The charge will be 15%. And it will take effect today."
A recent analysis of apartment owners in the super-luxe One Hyde Park development shows that 50 out of the 56 properties so far sold for a combined total of £1.1bn are owned by offshore companies. Half of those are based in the secretive British Virgin Islands, with six stationed in the Isle of Man and four in Guernsey.
The real owners therefore hide behind bland corporate names, but for the record you will find corporations such as Water Prop Holdings, a BVI company that has bought two apartments, for £86.2m and £50.24m, and is thought to be a front for the Ukrainian oligarch Rinat Akhmetov.
Then there is Rose of Sharon 5 Ltd, part of a string of Isle of Man companies created by Barclays bank for a client believed to be Nigerian billionaire Folorunsho Alakija. That firm has spent £59.05m and £6.35m on a brace of flats, which come complete with their own wine cellars and a dining service provided by a nearby five-star hotel. And there is Mesinger Holdings Corp, a Belize-based entity that acquired a pad in the complex's "Tower D" for £42.75m.
You will also find a Cayman Islands-based company called Park One, whose real owner is His Excellency Sheik Hamad bin Jassim bin Jaber al-Thani of Qatar. He just happens to be the financial backer of Project Grande (Guernsey) Ltd, the company set up as a joint venture with Candy & Candy to develop One Hyde Park.
The tax dodge, which is completely legal and is used by plenty of other ultra-wealthy investors, has proved effective because buying companies that own properties, rather than the properties themselves, attracted different tax rates.
When UK companies that owned properties were sold, they attracted a duty of 0.5% of the net assets – but the assets could effectively be brought down to zero by taking out a mortgage. If the property was held within an offshore company, there was no tax to pay regardless of the value of assets.
While stamp duty is paid by the purchaser, the seller implementing the schemes has still tended to gain as properties free of stamp duty tend to command higher prices. Tax experts also said that developers have wrapped yet-to-be-developed land into companies, meaning they pay rates on assets with lower values. Candy & Candy did not comment.
Paul Emery, PwC tax director, said: "The increase in the rate of stamp duty land tax to 7% on expensive residential properties is not altogether surprising, but the punitive charge of 15% on expensive residential properties transferred into companies is a clear sign that he is 'throwing the book at avoidance'. Combined with a threat of retrospective legislation for avoidance, it is a strong signal that residential property sales cannot escape tax".
He added: "The chancellor has stopped short of introducing the widely called for stamp tax on sales of companies already owning residential property, but the consultation on an annual property tax for high value residential property held by companies and a capital gains tax on off-shore companies may cause owners to think twice about their current ownership structure." The new taxes will only apply to residential, not commercial properties.
Toby Ryland, a senior tax partner at accountants Blick Rothenberg, said the announcement that overseas companies that already own UK residential property worth more than £2m will be subject to capital gains tax from April 2013 was a retrospective tax charge. He added: "This can only make the UK less attractive to overseas investors."
Some of the few identities of One Hyde Park purchasers that can be discovered directly from Land Registry records include Mohammed Saud Sultan al-Qasimi, head of finance for the government of Sharjah, one of the United Arab Emirates, who spent £11.5m on an apartment. Insurance entrepreneur Rory Carvill paid £21.2m on a property plus additional storage space.
Parking spaces have fetched a staggering £250,000, while three units of storage space sold for £150,000, £157,000 and £50,000.
