Qatari Diar Faces Higher Tax Bill on Chelsea Barracks Purchase

Qatar’s sovereign-wealth fund is liable for at least 12 million pounds ($18 million) more in taxes on an affiliate’s purchase of the Chelsea Barracks London luxury-housing development, a U.K. tax tribunal ruled.

The panel ruled that Project Blue Ltd. must pay 50 million pounds in stamp duty, a levy on residential real estate transactions, Her Majesty’s Revenue & Customs said in an e-mailed statement today. The Qatari Diar Real Estate Investment Co. affiliate would have paid 38 million pounds if it weren’t for the bid to avoid all of the stamp duty land taxes due, according to the statement.

“Entering into a tax-avoidance scheme can cost more than paying the original tax bill,” David Gauke, a Treasury minister, said in the statement. “Avoidance is complex, expensive and self-defeating.”

The judgment affects 24 similar commercial real estate transactions and 900 “mass market” residential property deals, protecting 135 million pounds of taxes including the Chelsea Barracks project, according to the statement. Project Blue had argued its transactions were carried out for commercial purposes and not to avoid tax, according to the statement by HMRC, which brought the case.

“We will be reviewing the tribunal’s decision in detail with our advisers and considering our next steps,” Qatari Diar said in a statement. “Project Blue has always tried to fully comply with all U.K. taxation matters evidenced by a pre-payment made on account to HMRC of the full amount of the tax originally claimed prior to the hearing. Project Blue will continue to meet all of its tax obligations.”

Qatar, the world’s biggest producer of liquefied natural gas, has amassed stakes in high-profile U.K. real estate, including the Shard skyscraper and Harrods department store. Chelsea Barracks is Qatari Diar’s largest European residential development in terms of value, according to its website.

A joint venture of Christian Candy’s CPC Group and Qatari Diar paid 959 million pounds for Chelsea Barracks in January 2008. When Britain’s Prince Charles later criticized the development as unsuitable for the area, Qatari Diar withdrew its planning application and CPC sued. Qatari Diar bought out CPC’s share of the project in 2010.

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE