MPs ask how Prince Charles avoids paying tax on £13m Duchy income

The Prince of Wales's tax affairs faced another round of public scrutiny yesterday - just as he was visiting the Treasury to talk to Gordon Brown about the importance of social responsibility.

Prince Charles was making a rare visit to Whitehall for a conference he has sponsored, to encourage businesses to play a role in supporting local communities. But he arrived just as a letter was sent to the Treasury by a committee of MPs, who want to know why the Prince pays no corporate tax or capital gains tax on the estate which gives him an income of £13m a year.

The Commons Public Accounts Committee (PAC) demanded to know what was special about the Duchies of Cornwall and Lancaster that put them outside normal tax regimes. The Duchy of Cornwall is Prince Charles's main source of income, and the Duchy of Lancaster is a source of revenue for the Queen.

Accounts posted on the Prince's official website show that his income from the Duchy - which is made up of 130,000 acres in 20 counties, mostly in south-west England - was more than £13m in 2005. From that he paid £5.2m in "tax and personal expenditure", but this figure includes the cost of employing nearly 130 full-time staff.

The PAC chairman, Edward Leigh, complained that its members were hampered in their "statutory duty" to investigate whether the nation received value for money from the monarchy by not being allowed to see the records on which the Prince's accounts are based.

"The committee would welcome the Treasury's view on whether there is anything about the status of the Duchy of Cornwall and Duchy of Lancaster that puts them outside the regimes for corporation tax and capital gains tax," wrote Mr Leigh. "The committee would also like to know whether the commissioners for HM Revenue and Customs have ever made a determination in relation to the Duchy of Cornwall or Duchy of Lancaster."

When the PAC raised the issue a year ago of the royals paying tax like everyone else, it received a letter from the Treasury defending the present arrangement. It said: "The Duchies were established for the sole purpose of providing an income for the sovereign and heir to the throne. This ensures that they maintain a degree of financial independence from the government of the day."

Prince Charles was at the Treasury for several hours to attend a conference on corporate and social responsibility that he sponsors. The conference heard a speech from Mr Brown, who carefully avoided any mention of tax.

Instead, the Chancellor thanked British businesses for their willingness to encourage voluntary work, and heaped praise on Prince Charles and the Prince's Trust, which he founded 30 years ago, to help disadvantaged young people find work.

Mr Brown said: "Modest as he is, the greatest satisfaction the Prince will have is not from the congratulations of us here, but from the many lives that have been changed, the many families whose prospects have been transformed and the many communities that have been renewed as a result of his vision."