Council deal taxing for Borderers!

EXCLUSIVE by DOUG COLLIE

Scottish Borders Council has confirmed it paid the £9.6 million needed to purchase the Lowood Estate, near Melrose, to two companies registered in the Cayman Islands, the offshore tax haven where corporations and individuals pay no tax at all on business transactions.

Ironically council taxpayers in the Borders who will fund the controversial deal SBC concluded with Lowood's owner Alexander Hamilton last December face a bill of £422,250 for UK Land & Buildings Transaction Tax which will be added to the purchase price together with a £30,000 VAT demand. Along with other fees and charges the true cost of the 109 acres of land will be £11 million.

The Cayman transactions involving island-based companies named as Lowood Estates Ltd. and Genesis Trust & Corporate Services Ltd have been uncovered by former SBC councillor Andrew Farquhar via a Freedom of Information [FOI] request.

Mr Farquhar's enquiry and the council's response seems certain to spark demands for full disclosure of the terms and conditions of the Lowood deal and for an independent investigation into the multi-million pound purchase using public funds.

The proposal to build up to 400 houses on the Lowood land is already mired in controversy with specialists warning development on such a massive scale could compromise the River Tweed Special Area of Conservation by increasing the risk of pollution.

In their response to Mr Farquhar's FOI, the council state: "Scottish Borders Council purchased Lowood Estate from Lowood Estates Limited, and Genesis Trust & Corporate Services Ltd, both companies incorporated in the Cayman Islands. The whole purchase price was paid to these companies."

An earlier information request revealed the list of additional costs incurred by the council on behalf of its taxpayers. These were:  Foreign Options  £3,100.00; Surveyors Fees  80,944.03; Sellers Solicitors Legal Fees & Outlays  £72,170.55; VAT on Surveyors & Legal Fees £30,596.92; Land & Buildings Transaction Tax  £422,250.00; Deed registration Lowood, Melrose  £7,500.00; Valuation Reports 16,163.80. On top of that the costs of temporary borrowing for the purchase of Lowood were estimated at £780,000.

When asked for clarification of the Foreign Options item on the list, SBC explained: "Our response should have read Foreign Opinions not Options. As the Sellers were Companies based in the Cayman Islands we couldn’t get the normal Company Searches so had to get Foreign Opinions instead to confirm the status etc. of the Companies. We had to get an Opinion for each Company."

Mr Farquhar said: "My reaction is that of a frustrated taxpayer whose money has been used for a questionable transaction which does not appear to be good value  and is being directed to an off shore tax haven. It makes no sense to me. Why should we be taxed on what we earn to pay taxes to fund millionaires who are tax exiles?"

According to its website Genesis Trust & Corporate Services Ltd. was incorporated in 1992 by the partners of [global accountancy firm] KPMG in the Cayman Islands. In 1998 Genesis Trust became fully licensed and regulated by the newly established Cayman Islands Monetary Authority ("CIMA"). 

"This allowed a broader and more comprehensive range of trust and corporate services to be offered to our clients", adds the company blurb. "In 2004 Genesis Trust separated from KPMG due to regulations introduced regarding auditor independence, namely the Sarbanes-Oxley Act and the revised Securities and Exchange Commission rules."

The KPMG connection is worth mentioning as the firm conducted external audits of Scottish Borders Council's books for a number of years before the work was taken in-house by Audit Scotland. Scrutinising the annual accounts carried a six-figure yearly fee for KPMG.

The accountancy firm continue to provide the external audit for the council's subsidiaries or arms length organisations SB Cares, SB Supports and Bridge Homes.

Genesis Trust's website claims: " Genesis Trust now provides services to several hundred entities and we are continually building upon our well-earned reputation as a quality service provider. Recruiting the right calibre of staff is essential to Genesis Trust. Our team is young, dynamic and made up of exceptionally well qualified professionals. Accordingly, we are ideally equipped to provide our clients the highest service standards in the industry.

"Companies can be set up in the Cayman Islands quickly and efficiently. A company can be formed within 24 hours, with the subscriber's meeting being held and the company's directors appointed."

Apparently Genesis can provide all of the following services for companies:

Maintenance of the Register of Directors and Officers.

Maintenance of the Register of Members.

Maintenance of the Register of Charges.

Maintenance of the minutes book and assistance with preparation of minutes for Directors and Shareholders, as required.

Submission of the Annual Return and payment of the annual fee to the Registrar of Companies.

Provision of company secretarial services, as required.

Provision of nominee shareholder if required.

Provision of Registered Office.