A super-rich Tory donor who is in charge of the party’s property portfolio has been hit with a £4.5million tax bill for unpaid VAT on an apartment block reportedly used by prostitutes and their clients.
HMRC has ruled that Dr Christopher Moran’s company which owns the London block – previously nicknamed “Ten Floors of Whores” – failed to charge VAT to short term occupiers of hundreds of apartments, including sex workers and their pimps.
Dr Moran’s lawyers said escort allegations were a “grotesque exaggeration” and his property company which owns and runs Chelsea Cloisters took a “zero tolerance policy” towards prostitution. He has been a director of the Conservative Party’s property arm C&UCO Properties Limited since 2006, though it is ultimately controlled by Prime Minister Rishi Sunak.
A 2018 investigation found more than 100 sex workers registered at Chelsea Cloisters, known to some punters as “Sodom and Gomorrah”. We can report that Dr Moran’s firm Realreel Limited which owns the building has been landed with a £4.5million VAT bill after HMRC ruled it incorrectly claimed revenue from Chelsea Cloisters was exempt.
Realreed Limited hadn’t taken professional advice on its VAT status since 1991 and so was hit with another £685,800 penalty for carelessness, which was suspended. Realreed contested both HMRC decisions at a tax tribunal and lost.
Dr Moran’s lawyers told the Mirror: “HMRC conducted numerous inspections, over many years, without having previously raised any objection to the company’s VAT position in respect of those activities. The proceedings were contested on the basis of advice received from Leading Counsel, and the Decision is currently subject to an appeal on the advice of Leading Counsel, such that it would be inappropriate for our clients to comment further.”
But Jo Maugham of the Good Law Project said: “Whilst the Tories hound a working class woman, Angela Rayner, over £1,500, which tax experts don’t think she owes, a company controlled by Rishi Sunak has as its director a man who failed to pay £4.5million in tax he owed on apartments used for trafficking and prostitution. It’s always one rule for the rich and another for the rest of us, isn’t it?”
Reelreed has donated £140,000 to the Conservative Party, while Dr Moran has donated a further £410,000 either personally or through another company. Most of this cash has been donated since it was revealed in 2018 his business had benefited from the rents paid by sex workers. Dr Moran’s firm Golden Lane Securities Limited has given the party £250,000 between 2019 and last August.
Reporters from the Sunday Times were able to make bookings with prostitutes at 23 separate flats at Chelsea Cloisters, including 15 let by Dr Moran’s firm. Dr Moran’s lawyers said: “The Sunday Times’ coverage reflected a grotesque exaggeration of the incidence of the use of Chelsea Cloisters by escorts. Chelsea Cloisters is one of the largest serviced apartment complexes in the UK (if not in Europe), with over 650 apartments and more than 1,000 guests at any one time.
“Even at that time (2018), the incidence of escorts using its rooms was relatively minuscule, including when compared with similar complexes in London. Chelsea Cloisters has always adopted a strict, zero tolerance policy towards escorts and takes such matters extremely seriously. Chelsea Cloisters takes immediate and firm steps to discourage them and, where escorts have indeed been found to be using its rooms, taking immediate (but of course lawful and humane) steps to evict them.”
The apartment block consists of more than 650 apartments and some commercial units. 421 are let on long leases, which are VAT free, but the dispute with HMRC is around the remaining 235 apartments. Realreed did not charge VAT to clients who stayed in these apartments, some for a few weeks, others for just a few days.
Services such as maids, dry cleaning, Wi-Fi, luggage storage and linen changes were provided by a sister company, Chelsea Cloisters Services Limited, also owned by Dr Moran, and which did charge VAT. A First Tier Tax Tribunal agreed with the HMRC that Chelsea Cloisters offered an “establishment similar to a hotel” and so was not exempt from VAT on letting income. It dismissed Realreed’s appeal against liability for the £4.5million tax charge. And it also dismissed its appeal against the additional £685,800 penalty for being careless in submitting an inaccurate VAT return.
Realreed said that HMRC had not challenged its VAT arrangements for many years, until 2019. But the tribunal judgement states: “Did Realreed itself take reasonable care? The short answer to that question is “No”.” There was “no evidence of Realreed ever having taken considered professional advice about its VAT affairs” or that it sought reassurance from HMRC.
HMRC told Reelreed in February 2019 that the transactions were taxable supplies of accommodation and not exempt. It made an assessment for unpaid VAT of £4.8million for the period from 2015 to 2019. Realreed hired former Chief Constable Sir Hugh Orde as a director in April 2019, reportedly to help stamp out criminality.