Harry and Meghan will be confronted with dire tax impact of abandoning royal family

The Duke and Duchess of Sussex will be confronted with the dire financial impact of abandoning the Royal Family at an extraordinary Sandringham summit tomorrow.

Royal aides and Government officials have drawn up a range of scenarios setting out the ‘stark implications’ faced by Harry and Meghan if they abandon or dramatically scale back their royal duties – including a major tax trap.

In what sources described as a ‘reality check moment’, Harry will travel to Sandringham for a showdown with the Queen, Prince Charles and Prince William. Meghan is expected to join by phone from Canada, where she is caring for their eight-month-old son, Archie.

A senior source said a solution that is ‘compatible with taxpayers, compatible with reality and compatible with the Queen’ was being sought.

But the mood is likely to be tense. The Mail on Sunday understands that anger over Harry and Meghan’s defiance of an order not to go public with their so-called ‘abdication’ plan has been compounded by the suggestion – denied by Palace sources – that the couple told Canadian Prime Minister Justin Trudeau about their move before the Queen.

Meanwhile, Meghan has been telling friends that a move to North America will be a welcome relief from her ‘toxic’ life in Britain.

At tomorrow’s meeting, Prince Harry will be handed documents, compiled following discussions with HMRC and the Canadian tax authority, that will set out in detail the financial penalties for a range of scenarios.

These include a so-called hard Megxit involving a permanent move to North America and a soft Megxit in which the couple split their time between Britain and overseas and retain full, active Royal roles.

Harry will be told that he would face a potential ‘double tax’ on any commercial income and a large bill for Frogmore Cottage, his home in Windsor, if he and Meghan decide to ditch their royal duties and relocate abroad.

The bill could run into millions of pounds. Canada requires residents – anyone who spends 183 days or more in the country – and some property owners to pay income tax on their global earnings. Similar rules apply in the UK, but the limit is 90 days.

It would mean that Harry might have to give up his UK residency or limit his time in Canada, else risk being double-taxed on any commercial income, paying in both countries.

Meghan, who is an American citizen, already has to pay tax in the US on any global earnings regardless of where she lives.

The couple may also face hefty charges on any funding they get from Prince Charles’s Duchy of Cornwall estate and could have to pay rent at commercial levels for Frogmore Cottage, which underwent a taxpayer-funded £2.4 million refurbishment before the couple moved in. The couple currently receive annual funding, also of about £2.4 million, mostly from Charles.

There is also genuine concern about the mental fragility of the couple – particularly Harry – so aides are doing all they can to try to ease any transition. They understood to have devised plans to offer special arrangements to reduce the couple’s tax liability if they agree to a fuller royal role. A royal source last night told The Mail on Sunday: ‘This meeting will give the Duke and Duchess an unvarnished look at the full implications of their choices.

‘Lots of assumptions have been made about how things can work, but this will be the time for workable decisions to be made in the full knowledge of the consequences and implications, however unappealing.’

Another Palace source said: ‘There are a range of possibilities to review. Next steps will be agreed at the meeting. The request for this to be resolved at pace is still Her Majesty’s wish. The aim remains days not weeks.’

Wayne Bewick, an expert on the Canadian tax system for the firm Trowbridge, said: ‘Harry’s duties for the Crown could be considered employment income for Canadian purposes.’

In addition to discussion of the Sussex finances, the Sandringham summit will discuss any potential new role for Harry. He is already President of the Queen’s Commonwealth Trust, which focuses on projects involving children, but one option might be to extend that role to make it easier to spend time in Canada.

In a day of dramatic developments:

• Donald Trump described the ‘Megxit’ battle as ‘sad’ and called the Queen a ‘great woman’;

• Meghan gave the media on Vancouver Island the slip last week by taking a budget flight instead of a private jet as they expected;

• The Queen was seen driving herself to a shooting party on the 20,000 acre Sandringham estate;

• Home Secretary Priti Patel and Security Minister Brandon Lewis were understood to be pushing for Harry and Meghan to retain royal security regardless of their future status;

• A poll for The Mail on Sunday found a generational divide with millennials supportive of the couple’s decision to step back from royal duties, but the opposite true of older baby boomers;

• Almost two-thirds of Canadians said they would welcome the appointment of Prince Harry as the country’s Governor-General.

There was no sign of Meghan yesterday at the £11 million mansion on Vancouver Island where she and Harry finalised their plan to scale back their royal duties over the New Year. But in a sign of the couple’s wish to spend considerable time in North America, they have moved their pet dogs to the property.

Despite the crisis, Palace sources say Harry will honour his commitment to host the draw for the 2021 Rugby League World Cup at Buckingham Palace on Thursday after which he is expected to fly to Canada to be reunited with his wife and son. 

Inside high-stakes negotiations at Sandringham: Prince Harry and Meghan Markle will be offered a compromise ‘Commonwealth role’ as courtiers desperately search for a face-saving solution to Megxit – and one aide warns ‘I’ve never seen the monarchy in such a bad state’

By Kate Mansey, Deputy Features Editor for the Mail On Sunday

Sandringham House, near the coast in rural Norfolk, is normally a private sanctuary for the Queen and Prince Philip, a place for family gatherings where they can escape the endless formalities of London and Windsor.

Since Wednesday, however, this Royal retreat has found itself at the heart of the crisis enveloping the Duke and Duchess of Sussex following their shock decision to step back from their official duties and spend more time in North America.

Palace sources say the Queen has demanded a solution be found ‘at pace’ – a sign of real concern in an institution that prefers to operate at glacial speed. But then, as a well-placed source put it: ‘I have never seen the monarchy in such a bad state.’

Behind closed doors, courtiers are desperately searching for a face-saving measure that will keep the family together and the dignity of the monarchy intact. And not only that, for Her Majesty is said to be increasingly concerned for Prince Harry’s mental wellbeing.

After days of meetings, The Mail on Sunday understands that senior courtiers are preparing to offer the Sussexes a compromise deal potentially involving a Commonwealth role. This would allow them to both maintain their HRH status and live in Canada.

Anxious to avoid exacerbating an already tense situation, the Royal Family is keen to tread carefully. A source said: ‘There is no suggestion that they will be punished or stripped of their Royal titles or HRH status. Everyone wants to find a solution to this as quickly as possible.’

All the same, the Palace let it be known that the 93-year-old Queen was ‘hurt’ and ‘disappointed’ by Prince Harry and Meghan’s decision to make their announcement without consulting senior Royals.

Prince Harry had been due to fly back to Canada with wife Meghan on Thursday to be united with their eight-month-old son Archie, but decided to stay on in Britain while a deal is thrashed out.

The Queen has a warm relationship with her grandson so it might seem a surprise that the ‘Megxit’ crisis, as it has been termed, should have been allowed to develop in this way.

In truth, however, tensions have been simmering for months.

It was back in May that Meghan and Harry first made it clear they would like to break away from what they see as the stifling constraints of life inside ‘The Firm’.

A source said that Meghan and Harry found the slow pace of Palace life ‘painful’ and that – in another echo of Brexit – Meghan wanted to ‘take back control’ of her work and charitable endeavours.

To the couple’s dismay, senior Royals were reluctant to discuss their plans with them – so the pair decided to take ‘time out’ with a six-week sabbatical to Canada in November and December.

This decision, too, came as a surprise: the Queen only found out about the break in November when she telephoned Harry to ask if he would be spending Christmas with the family at Sandringham. The answer was no.

Harry asked for a meeting with the Queen at Sandringham when he returned to Britain after Christmas, but it seems aides blocked this until he had ironed out the details of his future plans with his father, Prince Charles. He in turn asked his son to think about it some more and submit a more thorough proposal.

Harry tried again a few days later, and again he was told more time was required to consider the implications, particularly over how the funding would work.

It was made clear he should not make his proposals public until further discussions had taken place – so there was almost no warning at all when the storm broke over Sandringham. The Queen was still hosting the last of the informal gatherings of the festive season, with the decorations still on display (they traditionally remain up until February 6, to mark the anniversary of the death of the Queen’s father, George VI).

Just a few days before, the Duke and Duchess of Cambridge had joined her for the Sunday morning service at St Mary Magdalene Church on the estate. Kate’s parents Carole and Michael Middleton were there too, having recently returned from a winter break in St Barts in the Caribbean.

The sermon was given by Rt Rev Vivienne Faull, the Bishop of Bristol, who is believed to have later joined the family for Sunday lunch back in Sandringham’s ornate, green-painted dining room.

But late on Wednesday afternoon the atmosphere of celebration was shattered. A private secretary at Sandringham broke the news to the Queen just ten minutes before the Sussexes’ statement was made public. Her Majesty is thought to have been told of the announcement in a wood-panelled sitting room known as the salon – a room open to visitors who tour Sandringham when it opens to the public every summer.

Despite the traditional setting, the Queen is understood to have read the announcement on an iPad before watching coverage on TV as broadcasters revealed the shock announcement to the country.

Her public response, that there was much more to discuss, was delivered swiftly, as were comments from those inside the palace that senior Royals had been left ‘hurt’ and ‘deeply disappointed’.

It hardly helped that the following day, Thursday, was the Duchess of Cambridge’s 38th birthday.

Not only were courtiers alarmed by the abrupt way in which Harry and Meghan dropped their bombshell, but sources say there is also some bitterness that they were misled for weeks beforehand.

When the Palace first became aware that Harry and Meghan were launching a new website, Sussex Royal – set up by the team behind Meghan’s now defunct lifestyle blog The Tig – they had been reassured that its purpose was to support their charitable foundation.

So when it emerged that it was in fact to be the launch pad for their new independent career, many in the Palace felt that the couple had been disingenuous, or as one source rather more cautiously put it, their behaviour had been ‘suboptimal’. The timing, meanwhile, was terrible. Announcing such news ahead of Brexit and with the monarchy still reeling from the Prince Andrew debacle, not to mention the Duke of Edinburgh’s recent hospital stay, was seen as inconsiderate.

The response has been complicated by senior Royals being dispersed across the country – Charles is at Birkhall, his Scottish retreat in Aberdeenshire, and William was at his home in Kensington Palace.

Meghan has returned to Canada with Harry thought to be staying at Frogmore Cottage in Windsor.

Thankfully for the Queen, she has been able to rely on her 98-year-old husband for support. Prince Philip spends most of his time at Wood Farm, an unassuming cottage on the estate, after retiring from public life in 2017. However, The Mail on Sunday understands he has been staying in the main house since the crisis broke.

Sir Edward Young, the Queen’s private secretary, is overseeing the co-ordination of talks between the different households.

Yesterday aides from the four households of the Queen, the Prince of Wales, William and Harry were locked in talks at Buckingham Palace after earlier meetings involving some of Britain’s most high-ranking civil servants, lawyers and the keeper of the privy purse. The ‘principals’, as courtiers refer to members of the Royal Family, held telephone calls to discuss the options.

The Mail on Sunday understands that Sir Mark Sedwill, head of the Civil Service, has been drawing up plans to offer Harry and Meghan a high profile Commonwealth role, which would allow them to live in Canada and travel abroad on a certain number of official trips each year. Harry is already the president of The Queen’s Commonwealth Trust, last year Meghan was made vice-president – and it is a cause close to the Queen’s heart.

The arrangement could mean that the Sussexes could adopt a ‘George Clooney or Leonardo DiCaprio’ role, said one source, allowing their charitable endeavours to co-exist alongside their commercial interests without clashing.

But the source also pointed out that: ‘a half-in, half-out scenario will be very difficult to pull off’.

On the one hand they will have access to public occasions, such as riding in the carriages at Trooping the Colour and standing on the balcony at Buckingham Palace, but on the other hand they could be seen to be cashing in on their royal status – with a multi-million pound deal for Harry to work with US TV mogul Oprah Winfrey on a series about mental health already announced and an expected book by Meghan sure to be a bestseller.

Palace officials are looking at whether the Sussexes should be required to get Palace authorisation for each commercial deal, although this would undermine the freedom they are seeking.

An insider said: ‘The difficulty will come if they do a deal with a jewellery brand one day and then, on an official engagement, Harry is seen wearing one of the company’s watches. It will be hard to differentiate the two.’

It is hoped that an agreement can be reached by Wednesday.

Perhaps the clues to an imminent crisis were there all along or, at the very least, since Meghan guest-edited the August issue of Vogue. In Meghan’s Editor’s letter – reached by readers after 80-odd glossy pages of adverts for designer clothing and handbags – she quoted a book called The Four-Chambered Heart by Anais Nin, where a character says: ‘I must be a mermaid, Rango. I have no fear of depth and a great fear of shallow living.’

So was life in The Firm ‘too shallow’ for Meghan? Perhaps cutting ribbons at community centres was never going to satisfy the ambitious young actress who had her engagement ring ‘upgraded’ by adding extra diamonds to the band.

It is suspected that she had no wish, either, to play a supporting role to her sister-in-law, the Duchess of Cambridge.

The Sussexes will look to the example of former US President Barack Obama and his wife Michelle, who, after leaving the White House, launched a lucrative commercial career with multi-million-dollar book deals, a Netflix documentary series and carefully selected public speaking appearances without compromising their ‘brand’. But being a member of the Royal Family is different.

It’s far from clear, for example, exactly what sort of work Harry and Meghan could do without trading on their titles. The Sussex Royal trademark registered with the Intellectual Property Office allows them the right to produce trademarked goods – everything from notebooks to pyjamas.

A source said: ‘The trouble is that there is no precedent for this.’

And when it comes to the monarchy, that is quite a problem.