Since 2008 investors, from both the UK and abroad, have bought at least £100bn of property in London through shadowy foreign firms as they dodged taxes that could have potentially swelled government coffers.
Data compiled by Private Eye revealed that London has seen a total of 27,989 homes, office and retail developments and land transactions completed by such companies over the last six years.
And a shocking two thirds of those purchases were made by companies registered in one of four tax havens – the British Virgin Islands, Jersey, Guernsey and the Isle of Man.
Payam Azadi, director at Niche Advice, said: “Property prices in the UK have been steadily increasing over recent years and the impact of such schemes can be seen as negative for both London and the rest of the UK.
“But we need to be careful not to demonise foreign investors. There are a great number of legitimate foreign investors who come to the UK and are buying property for the proper reasons. We need to ensure that only the right people are being clamped down on – that is those that are setting up funds and buying swathes of property and leaving them empty for tax avoidance purposes.”
And it is this systematic avoidance which has seen wealthy British and foreign individuals potentially dodge huge amounts of both inheritance and capital gains taxes.
Before 2013 a Treasury loophole saw purchases through international firms also avoid paying stamp duty.
The rule allowing indirectly owned property to escape inheritance tax is still open but due to be closed in April 2017.
Robert Collins, head of commercial at Brightstar Financial, said: “This practice is carried out all over the world due to the disparate tax systems in place.
“London is not alone with cities such as Vancouver, Syndey and Auckland all seeing similar things happening.”
And Azadi agreed. He said: “It is a problem internationally but it should be remembered that it is also a UK wide problem. Whilst it is most pronounced in London the data shows that this is taking place across the country.”
Indeed a number of hotspots are revealed by the data. Private Eye’s data reveals that tax dodging investors are targeting a number of areas, including Marlborough in Wiltshire.
The market town, which has a long association with the British elite, has seen a significant amount of land and property purchased by firms registered in Luxemburg and Panama over the last few years.
However light does appear to be at the end of the tunnel for UK taxpayers. The data reveals that the volume of purchases through corporate entities has slowed down significantly since the Chancellor began to crack down on such avoidance.
Azadi added: “The fact that is slowing is down to the Chancellors attempts to curb this practice. This is systematic tax avoidance. It is now down to the government to finish the job.”
Private Eye linked more than 100,000 land title register entries to specific addresses around the country to compile its data.