5th March 2007 Dear Mr Henshaw, Thank you for your letters of ...

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Nineteenth ReportHM TreasuryThe Accounts of the Duchies of Cornwall and Lancaster.,Is the Duchies of Cornwall and Lancaster are not Government departments, thefirst part of the response to the Nineteenth Report from the Committee of Public.-Iccounts, is in respect of the recommendations made direct to kIM Treasury. Theresponses by the Duchies of Cornwall and Lancaster to recommendations made tothem are attached below.Recommendations made to HH Treasury:PAC conclusion (v): The Treasury should amend its Accounts Direction so thatthe Duchies have to follow public sector good practice and thereby comply withthe sane disclosure requirements as most other accounts presented toParliament....1. The Treasury will review and re-issue its Accounts Directions to the Duchies.The intention of the current directions is to require the Duchies to prepare theiraccounts in accordance with generally accepted accounting practice in the UK (UKGAAP), taking account of their legal structure. This will remain the case. TheTreasury does not believe that it will be appropriate to specify in the revisedaccounts directions the detailed presentation of specific statements and notes to theaccounts: the accounting standards themselves and other sources - eg theCompanies Act(s) - deal with such presentational issues.PAC conclusion (ix): The Duchies do not pay corporation tax or capital gainstax. As the Duchies are trading entities , it would be useful for the Treasury toprovide justification for the tax position of the Duchies , as distinct from that ofThe Queen and The Prince of wales , and explain the impact of this favourabletax position on the Duchies ' competitive position in the property and othermarkets in which they operate.2. The Duchies are not within the charge to Corporation Tax. The Duchies wereestablished for the sole purpose of providing an income for the Sovereign and Heirto the Throne. This ensures that they maintain a degree of financial independencefrom the Government of the day. The tax treatment of the Duchies must be seen inthis context, alongside that of their beneficiaries. This was the basis of the RoyalTrustees' report on Royal taxation and the Memorandum of Understanding,published in 1993.3. The Treasury does not believe that this treatment impacts on the competitiveposition of the Duchies. In this context, they can be considered to "compete" withother property investment organisations in the buying, selling and renting ofproperty. However, this is done in the open market. The Duchies have no advantagehere and are subject to market forces and prices in the same way as the otherorganisations operating in this area. Moreover, other very significant organisationsoperating in the investment property market face similar tax treatment to that of theDuchies.PAC conclusion (x): There should be an assessment of how well the surpluses ofthe two Duchies correspond to the respective needs of the Households of TheQueen and The Prince of wales....1
24. The Duchies are required by their governing legislation to provide incomes forcurrent and future Dukes. It is their responsibility to generate as much income as isreasonably possible, subject to having regard to sustainability, good managementpractice and, in particular, balancing the interests of current and future beneficiaries.It is also worth bearing in mind that the Civil List legislation makes no provision forsupporting the official duties of the Prince of Wales.
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