MPs will question Prince Charles's most senior aide on Monday over controversial tax arrangements that underpin the heir's £19m annual income.
After investigations into alleged tax avoidance by Amazon, Google and Starbucks, the public accounts committee wants to know why the prince's hereditary estate, the Duchy of Cornwall, does not pay corporation tax or capital gains tax and why the prince only pays income tax voluntarily on his earnings from the £847m property empire. Last year he offset almost £11m against official expenditure before paying a higher tax rate on the rest.
The House of Commons hearing will take evidence from William Nye, the prince's private secretary; Keith Wills, the duchy's finance director; and Paula Diggle, HM Treasury's officer of accounts.
It represents the most intense scrutiny yet of the prince's historic tax status, which has faced increasing recent challenges. Tax campaigners and anti-monarchy groups argue that the rationale for a special arrangement by which the duchy is not taxed and the prince pays tax voluntarily is unjustified, a claim Clarence House and the duchy of Cornwall strongly deny.
The hearing comes as details emerged of a unique tax arrangement to deal with the proceeds of the prince's partnership in a Dorset energy firm that he and the duchy helped set up with a group of farmers to extract methane from potato peelings and other biowaste.
The prince is a partner in JV Energen, which describes itself as the UK's first commercial-scale anaerobic digestion and biomethane injection plant. The joint venture is based on duchy land and is set up as a limited liability partnership, a vehicle that requires partners to pay their own income tax or corporation tax and capital gains tax on profits and proceeds in the normal way.
While the prince is the named partner using his Duke of Cornwall title, he will not directly face those taxes because the duchy holds the 54% share does not pay capital gains tax or corporation tax.
Any profits accruing from the prince's partnership will contribute to the duchy's surplus on which he pays income tax on a voluntary basis and after the deduction of expenses for official business. The plant opened in November and did not make any capital gains or trading profits in the year 2012-13.
Clarence House said the prince would pay income tax on any surpluses at the highest rate (after expenses were deducted), and any capital gains would, by law, be reinvested in duchy assets and so no capital gains tax should be paid.
"As with all duchy investments, any trading profits would form part of the duchy surplus, upon which the Prince of Wales pays the highest rate of income tax (after the deduction of business expenditure)," a spokeswoman for the duchy said. "The prince is not entitled to receive any capital gains from the duchy, and therefore does not pay capital gains tax."
The public accounts committee chairman, Margaret Hodge, said she would raise the arrangement at the hearing.
Graham Smith, chief executive of Republic, the campaign for an elected head of state, which alerted the committee to the JV Energen arrangement, said: "We have long known that Prince Charles enjoys a privileged tax position with regards to the Duchy of Cornwall but the extent of this exemption is increasing to new areas of activity.
"Had Prince Charles invested his own money and not used the title Duke of Cornwall he would have been liable to tax in the normal way. Isn't it astounding he chose not to do that in this current climate? He could have opted into tax, but he opted out."
This month the duchy defended the prince's tax arrangements after a Channel 4 Dispatches investigation. "The Prince of Wales chooses to use his income from the duchy, rather than public money, to cover the great majority of the cost of the public duties of both himself and the Duchess of Cornwall, as well as the Duke and Duchess of Cambridge and Prince Harry," it said.
"The prince pays income tax voluntarily on the surplus of the Duchy of Cornwall at the highest rate, which was 50% in 2012-13, resulting in a total of £4.4m (including an element of VAT)."
