One of Tony Blair’s greatest regrets was his Freedom of Information Act. Introduced as a Labour Party manifesto commitment in the general election of 1997, it was designed to make Government more accountable.
Tony Blair is on record as saying, ‘for political leaders it’s like saying to someone who is hitting you over the head with a stick ‘Hey try this instead’ and handing them a mallet!’
He went on to write ‘Three harmless words. I look at those words as I write them and feel like shaking my head till it drops off my shoulders. You idiot. You naïve, foolish, irresponsible nincompoop. There is really no description of stupidity, no matter how vivid, that is adequate. I quake at the imbecility of it…information is neither sought, because the journalist is curious to know nor given to bestow knowledge on ‘the people’. It’s used as a weapon.’
Why was Tony so incensed? Because, the master of spin, wanted to use his soundbite skills and celebrity connections to make money and continue the lavish lifestyle to which he and Cherie had become accustomed. But he did not want this accompanied by a ‘wall of noise’ from the press. It would undermine his ‘legacy’.
Labour peer and university mate of Tony’s, Lord Falconer criticized the Freedom of Information Act, when used ‘by journalists for ‘fishing expeditions’’ he goes on to say, ‘information needs to be handled responsibly and I strongly believe that there is a duty on behalf of the media as well!’
What tosh! Who is to judge when information is handled responsibly or not – surely the matter is subjective, not objective?
The automatic exchange of information under the OECD global initiative, implemented last month, is a case in point. The UK HMRC, I am sure, will do what it can to avoid this sensitive information about its rich UK residents, being leaked into the hands of journalists and thieves. But, it cannot stop its systems being hacked as we saw in the Panama papers or a rogue employee selling the information as we saw with the Bank of Liechtenstein!
But, there is another, far more immediate threat, which is that HMRC will use the information itself to go on a ‘fishing expedition?’
In the manual for the tax inspectors who are to deal with the information exchanged, they are told to look out for a UK resident settlor, who is alive, with a substantial trust offshore, and a person of ‘significant influence’, such as a Protector.
They are then told to approach the trustee offshore, with the claim that the trust was set up to ‘evade’ tax. The existence of a Protector, they are told to argue, is prima facie evidence of a ‘lack of intention’ to transfer unfettered ownership to the trustees and that the trust is a sham. With this prima facie evidence HMRC can then demand to see all the documents, the set-up correspondence and the marketing literature of the trustee company at the time the trust was set up.
HMRC is also told to look, in particular, for high profile settlors to name and shame, and will bring into the spotlight all other parties involved; lawyers, accountants, trustees, banks as well as the Protectors personally.
What can be done? What did Tony do - to protect himself from unwanted attention? He used structuring to protect his income from detection.
Tom Bower in his book, Broken Vows, claims that on leaving office, Tony commissioned accountants and lawyers – to erect ‘unusual barriers to prevent an accurate assessment of his wealth. All his income would be channelled through a complicated legal structure. At the top was BDBCo No.819 Ltd, a company that owned a clutch of other companies called either Windrush or Firerush. Windrush Ventures No.3 LP was part owned by Windrush Ventures No.2 LP which in turn controlled Windrush Ventures Ltd. The scheme’s advantage was that the LPs, or limited partnerships were not obliged to publish their accounts’.
Non-dom, UK resident settlors, of which there are just under 80,000, should review their structures. If they own assets offshore they need to minimize their risk of an investigation, by doing one of two things; pay a bit of tax and move the trust to the UK, or restructure to introduce more robust governance, without a Protector.
And my advice to any fiduciary, who may be reading this – find out how to de-risk your business as soon as possible. If you have any client who HMRC may like to ‘name and shame’ you may also find your name in lights – let alone exposed to litigation for negligence.
If you would like to find out more contact Caroline on 020 3740 7422 or email on email@example.com
Caroline’s book When you are Super Rich who can you Trust? and ‘How to win business from Private Clients’ can be bought on Amazon or go to www.garnhamfos.com