The Queen, a special case: Vivien Goldsmith explains why some royal expenses are tax-deductible

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THE OUTLINE of the agreement that the Queen and the Prince of Wales have made to pay some tax only goes to emphasise that the Royal Family are not ordinary citizens despite the protestations that they will be taxpayers like everyone else.

Michael Peat, the Royal Household's director of finance and property services, pinpointed the essential difference when he said: 'The Queen effectively never really goes on holiday.

'She always has to be accompanied by her private secretary. Every day of the year she has to read and respond to state papers.'

So, if she is always available for duty and is often actually performing her duties, it follows that her living expenses are part of her work.

The test for the rest of us as to whether expenses are tax-deductible is that they are 'wholly, necessarily and exclusively' essential for the performance of duties.

The Queen has taken some note of the 'ordinary' rules. So, while she will reclaim the cost of uniforms, she will not claim the cost of her extensive wardrobe of formal clothes.

The royal train, yacht and Queen's flight will be considered entirely 'working' expenses. But the Queen does maintain private cars for her personal use.

'The royal transport is basically used on official duty, as there is no benfit in kind,' said Keith Crofton Martin, a tax partner at the accountants Pannell Kerr Forster. 'I don't think the Queen will be filling in a P11D.'

This royal voluntary agreement to pay tax is not unique. Rouge Dragon Pursuivant and the other members of the College of Arms are exempt from income tax. But they all volunteer a cheque every year to the Inland Revenue.

On the inheritance tax front, the Wellington Museum at Apsley House and the Chevening estate are exempt.

The Queen's own residences, Sandringham and Balmoral, will also come outside the tax net. Mr Peat said: 'It is very probable that both these houses would qualify for inheritance tax exemption whether or not they are owned by the Queen.' This was because they were items of national heritage and publicly accessible.

But the most significant royal exemption from tax is that anything passed from sovereign to sovereign is tax-free.

For the rest of the population only wealth passed to a spouse is completely free of the risk of 40 per cent inheritance tax.

But there is a tax-free zone, at present pounds 150,000, and under standard indexation this will rise in the Budget to pounds 154,000. Only 30,000 estates a year pay the tax.

(Photograph omitted)

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