Archive Papers Document Scilly’s Secret Tax Loophole

hugh town from BuzzaA document about a tax loophole on the Isles of Scilly was kept locked by civil servants for 105 years to avoid anyone finding out about it.

The information was discovered by Somerset-based lawyer, John Kirkhope, while researching his new book about the Duchy of Cornwall.

John says it’s an intriguing story, which started in 1905, when a Mr Trenear from Scilly tried to buy a bulk load of methylated spirit in Penzance. At the time, only traders could buy large quantities of the fuel, and Mr Trenear had to apply for a special requisition book.

But in his application, he stated that he was from the Isles of Scilly, so didn’t have to pay any excise duty. That appears to have caused alarm bells to ring in the Revenue Department in London.

An investigation was launched, which showed that no-one, except for the Lord Proprietor of the Islands, Dorien Smith, paid any income tax, land tax or excise duty.

Even the customs officer that had been stationed here earlier couldn’t impose duty on goods. And even worse, the legislation drawn up by Parliament hadn’t include Scilly either, so they couldn’t enforce it.

The document was locked to prevent its contents being made public. It was only in 2007, when John asked for it’s release from the National Archives, that the information was revealed.

The documents highlight some interesting facts from the time.

In 1849, the total value of the islands was estimated to be around £6,000, entirely made up of property owned by Dorien Smith. His own house on Tresco was said to be worth £1,000.

And because the lease from the Duchy was administered on the mainland, he was liable to £400 a year income tax. But the inspectors appeared to take pity on the rest of the population. They said that the “poverty of the inhabitants” meant there would be very little benefit to the Revenue.

Unfortunately, over time, those loopholes were filled.

In 1910, excise duty was imposed on the islands, although income tax collection didn’t start until 1953.

And John says Mr Trenear probably had no idea about the fuss he caused in the Revenue Department.