Jan Klimkowski Wrote:http://www.guardian.co.uk/world/2009/feb/22/torture-pakistan-human-rights

The report will further embarrass the foreign secretary, David Miliband, who has repeatedly said the UK does not condone torture. He has been under fire for refusing to disclose US documents relating to the treatment of Guantánamo detainee and former British resident Binyam Mohamed.

Quote:New questions over David Miliband's property empire

By Glen Olwen
Last updated at 11:45 PM on 21st February 2009

Foreign Secretary David Miliband was at the centre of a riddle over his stake in a £2million property empire last night after an apparent sudden change in the ownership of one of his three houses.

The Mail on Sunday has established Mr Miliband has made a substantial profit in 12 years through a series of highly complex house deals.

Some have involved a complicated series of legal manoeuvres involving his brother, Energy Secretary Ed Miliband and their mother Marion.

Sitting pretty: David Miliband at his house, which used to be his mother's
Experts say the arrangements are similar to those used legally by some people to avoid paying inheritance and capital gains tax.

David Miliband, tipped to succeed Gordon Brown, and son of Marxist Professor Ralph Miliband, lives in a £1.3million house in one of London’s most fashionable suburbs and owns a £200,000 semi-detached house in his South Shields constituency.

Until last week he also owned a third home – jointly sharing the freehold with Marion and Ed. But on Wednesday, four days after he was asked by this paper to explain transactions on the property, the Land Registry said it had been informed of ‘an impending change’ in the title deeds on the London flat.

The property was given to David by his mother in the mid-1990s. She is the current occupant and has lived there since ‘swapping’ houses with David five years ago.

When first approached by The Mail on Sunday eight days ago, David refused to discuss ownership of the property.

On February 13 all three Milibands were still recorded as joint owners at the Land Registry and David was the leaseholder.

But it is now understood the freehold is to be handed over outright to Marion.

Multiple ownership is sometimes used to reduce inheritance or capital gains taxes although David denies any such intention.

An accountant explained that if a parent lives rent free in a house run by a family trust, it can be exempt from capital gains tax when the house is sold on their death as it does not count as a second residence.

David Miliband has denied the property is held in a trust but admits it was under multiple freehold ownership.

The expert said: ‘Where properties are shown in joint ownership, this often means that the properties are being held in a formal trust, and the terms of the trust allow the occupant – for example an elderly mother or father – to use the property rent-free.

‘In these cases, if the trust is cleverly designed, the property does not count as a second residence and can be exempted from capital gains tax when it is sold. It is perfectly legal.

If such an arrangement is reversed it is possible the individual has decided such action is inappropriate.’

Since last week’s change in ownership it is believed the Miliband brothers will now be exposed to full death duty on the property if their mother bequeaths it to them.

A spokeswoman for the Foreign Secretary insisted he had done nothing wrong. She said Mr Miliband and his brother had been planning to formally record the return of legal ownership of the property to his mother for several years, but they ‘just didn’t get round to it’.

David Miliband started building his property portfolio in the mid-Nineties when he was gifted the ground floor flat in North London, which his mother Marion had bought in 1981 for her own mother.

Mr Miliband, then a Labour policy wonk, moved in. It is thought the flat was worth around £150,000.

Shortly afterwards, in 1995, he bought the leasehold on the flat above and knocked the two together to turn them into a single property, then worth an estimated £250,000. It is now worth more than £500,000.

At around the same time, Ed bought the leasehold of the second floor flat directly above David’s.

Then, in a costly manoeuvre, David, Ed and Marion jointly bought the freehold on both properties.

With the freehold and leasehold secured, and buoyed by the London property boom, its value soared.

In 2001, David became MP for South Shields and bought a house in the constituency for £120,000. By 2007, he had claimed £109,000 in the MPs’ second home allowance – nearly as much as he paid for it.

The house is now estimated to be worth around £200,000.

In 2004, David, by now a family man performed another complex and lucrative manoeuvre.

On the face of it, he swapped the flat for his parents’ house – and he and his mother changed homes. But it was so complicated that the legal work is still being finalised – five years later.

The facts, in so far as they can be established, appear to be as follows.

As The Mail on Sunday has previously revealed, shortly after his father’s death in 1994 a ‘deed of variation’ transferred 20 per cent of the family house each to Ed and David.

The remaining 60 per cent was retained by their mother. Experts said the purpose was almost certainly to reduce death duty.

In 2004 David Miliband paid £800,000 for the property, ‘buying out’ his mother and brother’s interest in it. It became home for Mr Miliband, his musician wife Louise and their two adopted sons and is now estimated to be worth £1.3million.

In the same year, 2004, David Miliband sold the flat his mother had given him a decade earlier back to her. Yet curiously, there was no transfer of money involved. Nor was the transaction recorded by the Land Registry.


According to the Land Registry he still owns the freehold jointly with his brother and mother – though it appears to be in limbo.

A spokeswoman for David Miliband said that legal papers had been drawn up at the end of 2008 to change the freehold on the flat, to show his mother as the sole owner.

‘It is now in his mother’s name only,’ said the spokeswoman. ‘Papers went to the solicitor in the second half of last year.

The reason they did not change it before is they just did not get around to it. It’s complicated and expensive. It took a while for them to find a lawyer who could do it. All taxes have been paid in full.’

Mike Warburton, senior tax partner at the accountants Grant Thornton, said: ‘The family have skilfully built up their property assets and seem to have been careful to take advantage of the tax exemptions available in doing so.’

Wealthy family's complex deals

1981: Marion Miliband purchases leasehold on ground-floor flat for her mother, David’s grandmother, to live in.

Late 1980s: Grandmother dies.

1994: David’s father Ralph dies. A ‘deed of variation’ transfers 40 per cent of the family home to David and Ed, each getting 20 per cent. Marion keeps 60 per cent. Usually carried out to limit death duty liabilities.

Mid-1990s: David is ‘gifted’ the ground-floor flat. Purchases the leasehold on the first floor flat and wins planning permission to knock the two into one flat. Estimated combined value £250,000.

1996: Ed purchases the leasehold on the second-floor flat. Estimated value £150,000.

1996: David, Ed and Marion jointly purchase the freehold covering the two flats.

2000: Land Registry records David as the sole owner of the leasehold on his flat.

2001: David buys South Shields constituency home for £120,000.

2004: David sells his London flat to mother. There is no transfer of money; the transaction is not recorded by the Land Registry. Flat estimated to be worth £500,000.

2004: David pays £800,000 for his old family home and moves in. The house is today worth £1.3million.

2006: Ed sells second floor flat to a third party for £342,500. Pays £650,000 for a flat around the corner.

February 13, 2009: Land Registry still records David, Ed and Marion as joint owners of the freehold.

February 18: Land Registry says it has received notification of an ‘impending change’.

Quote:David Miliband, tipped to succeed Gordon Brown, and son of Marxist Professor Ralph Miliband, lives in a £1.3million house in one of London’s most fashionable suburbs and owns a £200,000 semi-detached house in his South Shields constituency.