Scotland formally calls on UK to close “tax haven” loophole
SCOTLAND has formally called on the UK to close a legal loophole that allows Scottish firms to be used as secret offshore tax shelters.
Holyrood politicians have been demanding action on Scotland’s limited partnerships (SLPs) ever since some of the unique corporate arrangements were exposed as Eastern European money-laundering vehicles in this newspaper last year.
Now – after a series of scandals involving such firms – Finance Secretary Derek Mackay has reached out to UK ministers with specific recommendations for reform.
Westminster politicians, like their colleagues north of the border, have long warned of the dangers of tax evasion and other criminality using offshore structures.
However, ministers have been slow to react to growing reports that several different kinds of British firms and disproportionately SLPs were being exploited by tax evaders and money-launders.
Defenders of SLPs stress that they have a legitimate purpose, including their widespread use by Scottish law firms to create tax-efficient investment vehicles for non-criminal businesses.
Striking a constructive tone, Mackay has formally written to Greg Clark, Secretary of State for Business, Energy and Industrial Strategy to ensure that the ultimate owners of SLPs are exposed and that the companies are closely monitored.
Mackay said: “I would welcome your support in how we can ensure that SLPs are not seen as an easy means to achieve their criminal goals.
“I recognise that it will be important to secure the right balance whereby we do not get rid of the many benefits that are offered to legitimate businesses through SLPs, but it is important that we are not seen as a haven for those who wish to pursue criminal activity.”
Observers have suggested a series of reforms to SLPs, including robust examinations of their partners, which are often formally registered in more traditional fiscal paradises with secrecy regimes.
Mackay asked if UK ministers would extend new laws forcing firms to declare “people of significant control” to SLPs.
Law firms creating SLPs have been boasting that this is not the case – but stressing that some SLPs may have to declare their ultimate general partner if they have an interest in a UK portfolio firm.
Mackay, citing recent press revelations on SLPs, concluded: “The threat of serious organised crime does not respect borders and with the significant increase in cyber related crime, it is essential that we take every step open to us to reduce this threat as much as possible.
“Closing off this avenue is the right, and proper, course of action and I would welcome your commitment and support in achieving this.”
Scottish Justice Secretary Michael Matheson had earlier called for action on SLPs, as have Labour, the Greens and the Scottish Liberal Democrats.