The Queen's complicated tax status — explained

  • The Queen was named in the dataleak dubbed the "Paradise Papers," after the Duchy of Lancaster was found to have invested in offshore funds.
  • An investment was also made in rent-to-own retailer Brighthouse, which was criticised earlier this year for being irresponsible. 
  • There is no suggestion the Queen or Royal Household are involved in wrongdoing.
  • The Queen is officially exempt from tax, but makes voluntary payments on income, assets and gains not used for official purposes.

LONDON — The Queen of England is one of the array of wealthy individuals to have been named in the Paradise Papers dataleak, but has she done anything wrong?

The leak, handed to the International Consortium of Investigative Journalists (ICIJ) and published on Sunday, details the complex financial arrangements that allow some of the world's wealthiest to legally hide their money and assets offshore, arranged by offshore law firm Appleby

According to the documents, the Duchy of Lancaster, which provides the Queen with some of her income and deals with investments for her £500 million private estate, invested as much as £10 million offshore in funds based in the Cayman Islands and Bermuda.

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This official photograph released by Buckingham Palace to mark her 90th birthday shows Britain's Queen Elizabeth with her husband, Prince Philip, and was taken at Windsor Castle, in Windsor, Britain just after Easter 2016. Annie Leibovitz/Handout via Reuters - THIS IMAGE MAY BE USED FREE OF CHARGE, INTERNATIONALLY, FOR 14 DAYS FROM RELEASE, UNTIL FRIDAY, JUNE 24, 2016. AFTER THIS DATE, FOR USE OR REPRODUCTION IN ANY FORMAT ON ANY PLATFORM, PLEASE REFER TO ROYAL COMMUNICATIONS FOR APPROVAL. NO COMMERCIAL OR BOOK SALES. NO SALES. NO ARCHIVES. FOR EDITORIAL USE ONLY. NOT FOR SALE FOR MARKETING OR ADVERTISING CAMPAIGNS. THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY. IT IS DISTRIBUTED, EXACTLY AS RECEIVED BY REUTERS, AS A SERVICE TO CLIENTS. TPX IMAGES OF THE DAY
20th November 1947: Princess Elizabeth, and The Prince Philip, Duke of Edinburgh at Buckingham Palace after their wedding. (Photo by Hulton Archive/Getty Images)
POUNDBURY, ENGLAND - OCTOBER 27: Queen Elizabeth II and Prince Philip, Duke of Edinburgh attend the unveiling of a statue of Queen Elizabeth The Queen Mother during a visit to Poundbury on October 27, 2016 in Poundbury, Dorset. (Photo by Mark Cuthbert/UK Press via Getty Images)
(Original Caption) Queen Elizabeth II and Prince Philip fly back from a visit to Yorkshire in an Andover of the Queen's Flight, in a photo taken during the filming of the joint ITV-BBC film documentary The Royal Family.
LONDON - JUNE 1: Queen Elizabeth II and Prince Philip, the Duke of Edinburgh chat during the Gulf Parade in London on June 1, 1991. (Photo by Anwar Hussein/Getty Images)
LONDON - OCTOBER 20: Queen Elizabeth ll and Prince Philip the Duke of Edinburgh wear safety glasses during a laser surgery demonstration at the opening of University College Hospital in London on October the 20th 2005. (Photo by Anwar Hussein/Getty Images)
1947: H R H Princess Elizabeth and Philip Mountbatten, Duke of Edinburgh, on the occasion of their engagement at Buckingham Palace in London. (Photo by Fox Photos/Getty Images)
Queen Elizabeth, Prince Philip, Prince Andrew and Prince Edward waving to the crowds from the balcony at Buckingham Palace, during the Trooping of the Colour. (Photo by Fox Photos/Getty Images)
1947: Princess Elizabeth and Prince Philip, Duke of Edinburgh at Buckingham Palace shortly before their wedding. (Photo by Hulton Archive/Getty Images)
DUNSTABLE, UNITED KINGDOM - APRIL 11: (EMBARGOED FOR PUBLICATION IN UK NEWSPAPERS UNTIL 48 HOURS AFTER CREATE DATE AND TIME) Queen Elizabeth II and Prince Philip, Duke of Edinburgh feed bananas to Donna, a 7 year old Asian Elephant, as they open the new Centre for Elephant Care at ZSL Whipsnade Zoo on April 11, 2017 in Dunstable, England. (Photo by Max Mumby/Indigo/Getty Images)
Princess Elizabeth with her husband Philip, son Charles and daughter Anne. She is the future Queen Elizabeth II of England. (Photo by � Hulton-Deutsch Collection/CORBIS/Corbis via Getty Images)
(Original Caption) Christmas at Windsor Castle is shown here with Queen Elizabeth II and Prince Philip shown putting finishing touches to Christmas tree, in a photo made recently during the filming of the joint ITV-BBC film documentary, The Royal Family.
LONDON, UNITED KINGDOM - JUNE 21: Queen Elizabeth ll and Prince Philip, Duke of Edinburgh attend the Gulf War Victory Parade in the City of London on June 21, 1991 in London, England. (Photo by Anwar Hussein/Getty Images)
ICELAND - JUNE 25: The Queen And Prince Philip In Iceland. (Photo by Tim Graham/Getty Images)
Queen Elizabeth II, accompanied by Prince Philip, sits in the House of Lords before delivering her speech at the State Opening of Parliament May 14. Prime Minister Tony Blair committed his new Labour Government to a major programme of constitutional reform aimed at making a decisive break with 18 years of Conservative rule. BRITAIN
Queen Elizabeth II and Prince Philip arrive for the start of Royal Ascot on Ladies Day June 17. The Queen, who is a keen racing fan and owner, had a winner with her horse Blueprint on the first day of the meeting. AS
Britain's Queen Elizabeth II stands on the balcony with Prine Philip, the Duke of Edinburgh at Buckingham Palace for the Trooping the Colour ceremony to honour her official birthday June 16, 2001. Trooping the colour has honoured the sovereign's official birthday since the 17th century and dates back to the earliest times of armed conflict, when each leader needed his own flag or colours to stand out clearly amid the smoke and dust of battle which led to regular trooping allowing soldiers to recognise the colours around which they should rally. BR
CANADA - MARCH 08: Royal tour of Australia and New Zealand by the King and Queen with Princess Margaret Rose early next year will be first by the reigning king. Princess Elizabeth shown here with Philip on New Zealand barque in London; will stay at home (Photo by Toronto Star Archives/Toronto Star via Getty Images)
Britain's Queen Elizabeth II (L) and Prince Philip attend the Sovereign's Parade at Sandhurst Military Academy, in south-east England, 12 April 2006. The Queens' grandson Prince Harry graduated from the elite Sandhurst military academy Wednesday. Officer Cadet H Wales as Prince Harry is known, will train to become a troop commander, in charge of 11 enlisted men and four light tanks -- a job that could soon see him on front-line duty in Iraq or Afghanistan. His grandmother Queen Elizabeth II, who turns 80 on April 21, and father Prince Charles both turned out for the passing-out ceremony where Harry and 218 other officer cadets in crisp blue uniforms, each carrying thin silver swords, received their commissions after 44 weeks of gruelling training. (Photo credit should read CARL DE SOUZA/AFP/GettyImages)
Princess Elizabeth (later Queen Elizabeth II) and Prince Philip make their way down the aisle of Westminster Abbey, London, on their wedding day, 20th November 1947. Original Publication: Picture Post - 4438 - Royal Wedding - pub. 1947 (Photo by Bert Hardy/Picture Post/Hulton Archive/Getty Images)
Queen Elizabeth and Prince Philip, Duke of Edinburgh leaving Westminster Abbey after the annual Maundy Ceremony, 7th April 1966. (Photo by Central Press/Getty Images)
Britain's Queen Elizabeth and Prince Philip watch the sack race at the annual Braemar Highland Gathering in Braemar, Scotland, Britain September 5, 2015. Queen Elizabeth will become Britain's longest-ever serving monarch on September 9. REUTERS/Russell Cheyne TPX IMAGES OF THE DAY
Queen Elizabeth II and Prince Philip at the dedication of a Knights Bachelor temple at the church of St. Bartholomew The Great, London, 10th July 1968. (Photo by George Freston/Hulton Archive/Getty Images)
390922 07: Britain''s Queen Elizabeth, Prince Philip and Prince Andrew arrive in a carriage June 21, 2001 at Ascot Racecourse in Ascot, England. (Photo by Anthony Harvey/Getty Images)
Queen Elizabeth II and her husband Prince Philip talk as they watch a calvary display by the elite Cadre Noir riding college in Paris 06 April 2004, on the second day of a three-day state visit to mark the centenary of the Entente Cordiale, the colonial-era promise of cross-channel friendship between Britain and France. AFP PHOTO/POOL/ERIC FEFERBERG (Photo credit should read ERIC FEFERBERG/AFP/Getty Images)
The Queen & The Duke Of Edinburgh Attend A Service Of Commemoration To Mark The Bicentenary Of The Abolition Of The Slave Trade Act At Westminster Abbey, London. (Photo by Mark Cuthbert/UK Press via Getty Images)
LEICESTER, ENGLAND - APRIL 13: Queen Elizabeth II and Prince Philip, Duke of Edinburgh attend the Royal Maundy service at Leicester Cathedral on April 13, 2017 in Leicester, England. The Queen & Duke of Edinburgh travelled by car from Leicester station along Humberstone Gate, High Street and Jubilee Square. (Photo by Mark Cuthbert/UK Press via Getty Images)
LONDON, ENGLAND - NOVEMBER 01: Queen Elizabeth II and Prince Philip, Duke of Edinburgh attending the Official Ceremonial Welcome for the Colombian State Visit at Horse Guards Parade on November 1, 2016 in London, England. The President of the Republic of Colombia Juan Manuel Santos and his wife Maria Clemencia Rodriguez de Santos are paying their first State Visit to the UK as official guests of Queen Elizabeth. (Photo by Mark Cuthbert/UK Press via Getty Images)
WINDSOR, ENGLAND - NOVEMBER 27: Queen Elizabeth II and Prince Philip, Duke of Edinburgh greet His Highness the Amir Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah of Kuwait at a Ceremonial Welcome Windsor Castle on November 27, 2012 in Windsor, England. (Photo by Samir Hussein/WireImage)
Britain's Queen Elizabeth II (L) arrives with Prince Philip, The Duke of Edinburgh (R) at Westminster Abbey in London, for a service to mark the Passing of The World War One Generation, on November 11, 2009. Queen Elizabeth II led Britain in marking Armistice Day on Wednesday -- along with troops on the frontline in Afghanistan -- while commemorating the passing of the World War I generation of soldiers. At 11:00 am (1100 GMT), 91 years since the Great War armistice came into effect, people fell silent for two minutes to remember those who fought and gave their lives in the 1914-1918 conflict. AFP PHOTO/Adrian Dennis (Photo credit should read ADRIAN DENNIS/AFP/Getty Images)
LONDON, ENGLAND - NOVEMBER 18: Queen Elizabeth II and Prince Philip, Duke of Edinburg leave after the State Opening Of Parliament on November 18, 2009 in London, England. Queen Elizabeth II unveiled the Government's legislative programme in a speech delivered from the Throne in The House of Lords. This new session of Parliament will only last until the general election which has to be called by June 3, 2010. (Photo by Toby Melville/WPA Pool/Getty Images)
Britain's Queen Elizabeth II (L) and Prince Philip, Duke of Edinburgh (R), watch a performance during a visit to re-open the tea clipper Cutty Sark in Greenwich, east London, on April 25, 2012. The Cutty Sark, built in 1869 was one of the last and one of the fastest tea clippers to be built. The Cutty Sark was badly damaged by fire on in May 2007 but after a 50 million GBP (80.6 million USD) restoration project the vessel is restored and will reopen to the public on April 26. AFP PHOTO / POOL / KIRSTY WIGGLESWORTH (Photo credit should read KIRSTY WIGGLESWORTH/AFP/Getty Images)
LONDON, ENGLAND - OCTOBER 22: Queen Elizabeth II and Prince Philip, Duke of Edinburgh bid farewell to President of the Peoples Republic of China, Mr Xi Jinping and his wife, Madame Peng Liyuan at Buckingham Palace on October 22, 2015 in London, England. The President of the Peoples Republic of China, Mr Xi Jinping and his wife, Madame Peng Liyuan, end a State Visit to the United Kingdom as guests of The Queen. They stayed at Buckingham Palace and undertook engagements in London and Manchester. The last state visit paid by a Chinese President to the UK was Hu Jintao in 2005. (Photo by Chris Jackson/Getty Images)
LOSSIEMOUTH, SCOTLAND - NOVEMBER 20: Prince Philip, Duke of Edinburgh and Queen Elizabeth II pose for a photo during a visit to RAF Lossiemouth on their 67th wedding anniversary on November 20, 2014 in Lossiemouth, Scotland. It was the Queen's first visit to the base since 2003. (Photo by Danny Lawson - WPA Pool/Getty Images)
Britain's Queen Elizabeth and Prince Philip leave Horseguards Parade after the annual Trooping the Colour ceremony in central London, Britain June 11, 2016. Trooping the Colour is a ceremony to honour Queen Elizabeth's official birthday. The Queen celebrates her 90th birthday this year. REUTERS/Dylan Martinez
Britain's Queen Elizabeth and Prince Philip stand on the balcony of Roemer townhall in Frankfurt, Germany June 25, 2015. Queen Elizabeth and the Duke of Edinburgh are on a three day state visit to Germany. REUTERS/Boris Roessler/Pool TPX IMAGES OF THE DAY
U.S. President Barack Obama and first lady Michelle Obama are greeted by Queen Elizabeth II and Prince Philip, Duke of Edinburgh upon their arrival for lunch at Windsor Castle in Windsor, Britain April 22, 2016. REUTERS/Kevin Lamarque TPX IMAGES OF THE DAY
THE QUEEN AND PRINCE PHILIP ARRIVE AT A PRIVATE PARTY FOR BRITAIN'S QUEEN ELIZABETH AT THE RITZ HOTEL IN LONDON.
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"Our investment strategy is based on advice and recommendation from our investment consultants and appropriate asset allocation," Chris Adcock, CFO of the Duchy told the BBC.

"The Duchy has only invested in highly regarded private equity funds following a strong recommendation from our investment consultants," he said.

However, about £4,000 was invested in rent-to-own retailer Brighthouse, which was last month found by the Financial Conduct Authority not to be a "responsible lender," and was criticised in 2011 by charity Barnardo's for being "morally bankrupt." The Duchy reportedly did not know of the investment in Britghthouse until it was approached by The Guardian.

The Duchy said it had not received tax advantages from investing offshore, and that the Brighthouse holding now equates to £3,208. There is no suggestion that the investments are illegal, or that the Queen is illegally evading tax.

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The royal family net worths
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The royal family net worths

Queen Elizabeth II Net Worth: $550 Million

Photo credit: Reuters 

Prince Charles Net Worth: $100 Million 

Photo credit: Getty 

Prince William Net Worth: $40 Million

Photo credit: Getty 

Prince Harry Net Worth: $40 Million

Photo credit: Press Association

Prince Philip Net Worth: $30 Million

Photo credit: Press Association

Kate Middleton Net Worth: $10 Million

Photo credit: Press Association

Camilla Parker Bowles Net Worth: $5 Million

Photo credit: Press Association

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However, the revelations have sparked debate about whether the Queen should be investing offshore and how much oversight is given to investments.

Speaking at the CBI conference on Monday, Labour leader Jeremy Corbyn said the Queen, and anyone making offshore investments, should apologise.

The Queen's tax status 

According to the Royal Household, the Monarchy has "sometimes been described as an expensive institution, with Royal finances shrouded in confusion and secrecy." In reality, it says, the Household is "committed to ensuring that public money is spent as wisely and effectively as possible, and to making Royal finances as transparent and comprehensible as possible."

A 2013 Memorandum of Understanding outlined that the Queen is not legally liable to pay income tax, capital gains tax or inheritance tax. Instead, the Queen and the Prince of Wales make voluntary payments to the UK tax authority HM Revenue and Customs (HMRC), but the details of the payments are private.

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Every world leader Queen Elizabeth II has outlasted
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Every world leader Queen Elizabeth II has outlasted

United States President Dwight Eisenhower

(Photo by Keystone-France/Gamma-Keystone via Getty Images)

French President Rene Coty

(Photo by Keystone-France/Gamma-Rapho via Getty Images)

Russian Leader Georgi Malenkov

(Photo by Keystone-France/Gamma-Keystone via Getty Images)

Russian Leader Nikita Khruschchev

(Photo via Getty Images)

British Prime Minister Harold Macmillan

(Photo by Terry Disney/Central Press/Getty Images)

British Prime Minister Sir Anthony Eden

(Photo by Keystone-France/Gamma-Keystone via Getty Images)

French President General Charles de Gaulle

(Photo by Keystone-France/Gamma-Keystone via Getty Images)

United States President John F. Kennedy

(Photo via Getty Images)

British Prime Minister Sir Alec Douglas-Home

(Photo by Hulton-Deutsch Collection/CORBIS/Corbis via Getty Images)

United States President Lyndon B. Johnson

(Photo via Getty Images)

German Chancellor Ludwig Erhard

(Photo by Keystone-France/Gamma-Keystone via Getty Images)

British Prime Minister Harold Wilson

(Photo by Fox Photos/Hulton Archive/Getty Images)

German Chancellor Kurt-Georg Kiesinger

(Photo via Getty Images)

United States President Richard Nixon

(Photo via PA)

British Prime Minister Edward Heath

(Photo by Keystone/Hulton Archive/Getty Images)

French President Pompidou

(Photo by J. Cuinieres/Roger Viollet/Getty Images)

German Chancellor Willy Brandt

(Photo by Mike Lawn/Fox Photos/Getty Images)

United States President Gerald Ford

(Photo by: Photo12/UIG via Getty Images)

French President Valery Giscard d'Estaing

(Photo credit ARCHIVE/AFP/GettyImages)

German Chancellor Helmut Schmidt

(Photo by Thomas Imo/Photothek via Getty Images)

Russian Leader Leonid Ilich Brezhnev

(Photo by: Universal History Archive/UIG via Getty Images)

British Prime Minister James Callaghan

(Photo by David Ashdown/Keystone/Getty Images)

United States President Jimmy Carter

(Photo via Getty Images)

British Prime Minister Margaret Thatcher

(Photo via Getty Images)

United States President Ronald Reagan

(Photo by Anwar Hussein/Getty Images)

French President Mitterrand

(Photo via PA)

German Chancellor Helmut Kohl

(Photo by Tim Graham/Getty Images)

Russian Leader Yuri Vladimirovich Andropov

(Photo credit should read AFP/Getty Images)

Russian Leader Konstantin Chernenko

(Photo via Getty Images)

Russian Leader Gobrachev

(Photo by Peter Turnley via Getty Images)

United States President George H.W. Bush

(Photo by Tim Graham/Getty Images)

British Prime Minister John Major

(Photo by Richard Baker / In Pictures via Getty Images)

Russian Leader Boris Yeltsin

(Photo via TASS / Valentin Cheredintsev via Getty Images)

United States President Bill Clinton

(Photo credit should read GERRY PENNY/AFP/Getty Images)

French President Chirac

(Photo by Tim Graham/Getty Images)

Prime Minister Tony Blair

(Photo by Pool Photograph/Corbis/Corbis via Getty Images)

German Chancellor Gerhard Schroeder

(Photo credit JOHANNES EISELE/AFP/Getty Images)

Russian President Vladimir Putin

(Photo by Julian Herbert/Getty Images)

United States President George W. Bush

(Photo credit STEPHEN HIRD/AFP/Getty Images)

German Chancellor Angela Merkel

(Photo credit JOHN STILLWELL/AFP/Getty Images)

British Prime Minister Gordon Brown

(Photo via PA)

French President Nicolas Sarkozy 

(Photo by EMPICS Entertainment/PA)

Russian Leader Dmitry Medvedev

(Photo by Anton Novoderezhkin\TASS via Getty Images)

United States President Barack Obama

(Photo by Lewis Whyld - WPA Pool/Getty Images)

Prime Minister David Cameron

(Photo by John Stillwell/WPA Pool/Getty Images)

French President Francois Hollande

(Photo by Pascal Le Segretain/Getty Images)

British Prime Minister Theresa May

(Photo by Mark Cuthbert/UK Press via Getty Images)

United States President Donald Trump

(Photo by Molly Riley/Pool via Bloomberg/Getty Images)

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However, the Sovereign Grant is exempt. This Grant is an annual payment that funds the Queen's official duties, and was £42.8 million ($56 million) in 2016/17.

In essence, the Queen receives this payment in exchange for giving the government all but the equivalent of 15% of profits from the Crown Estate. It covers expenses including the family's travel, palace upkeep and royal employee salaries, and the accounts are audited by the National Audit Office and the Public Accounts Committee.

But income tax is paid on private sources of the Queen's income, known as the Privy Purse, and on trading profits. This includes the Duchy of Lancaster, a portfolio of land and assets owned by the royal family. The Duchy of Cornwall, another portfolio of properties, covers the Prince of Wales' and his heirs' costs.

According to Sovereign Grant accounts, income from the Duchies of Lancaster and Cornwall that go towards the Privy Purse "is taxed to the extent that the income is not used for official purposes."

Capital gains tax is only paid by the Queen on gains from the disposal of private assets from April 1993 onwards.

In theory, a tax liability could arise on the Queen's offshore investments, said Paul Noble, Tax Director at law firm Pinsent Masons. However, since we don't know whether or not the income goes towards state business, "it's not totally clear."

"You get one side of the coin and you have to speculate on what the other side might be," he said. Moreover, it's hard to know whether someone like the Queen "is actually aware of where these funds are invested." As such, he said, "it's not so much a question of criticism of... the Queen, it should be of those who advise her."

So, there you have it. It's tricky.

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