- Last Updated: 28 March 2014
Monday's BBC Panorama programme exposed the problem that affects tax authorities worldwide: nominee directors and offshore companies.
The programme also demonstrated the lengths that some tax advising firms are willing to go in order to earn fat fees and assist criminals in hiding untaxed income offshore.
The reporters found that if you have undeclared income and you phone around firms in the UK it is quite easy to find some dodgy agents who will set up you up with a company, run by nominee directors in the tax haven of their choice. Your nominee directors sign your forms for you and are generally based abroad, typically in a territory which has strong laws on confidentiality. They are simply paid to sign forms and pass any resolutions that you require and they have no other role in respect of their company - the point being that it is not their company at all. Some nominees look after thousands of companies.
if you are a tax criminal and wish to set up a structure like this you will be quoted a minimum of £25,000 with annual fees of £2,000 + but you will find that once involved you will have to pay a lot more. Having created your offshore vehicle it may then spout subsidiaries and expand via tax havens. If it becomes a bigger affair you may have to employ staff to live your dream because the companies are real and they require at least a bookkeeper to write out cheques for you. Ultimately you will be living near your company because it is located in warmer climes but also if it gets too big you won't trust your employees and it is not that easy to repatriate funds to the UK. A hedge fund will greatly help in that department but you can also buy a business in the UK and launder cash via the tax system.
Back to Panorama, the unreported story, which is the Achilles heel for many of these offshore structures is that they are all actually controlled and directed by others. These others are termed in law as 'quasi' or 'de facto' directors. Panorama did not look at this angle - perhaps this is for another program, this time it concentrated only what it termed as sham directors. Many of these had been part of the "Sark Lark" a group of Sark islanders who managed control umpteen companies from islands stretching from the Crown principalities to the Caribbean.
The larkers were removed under pressure from neighbours such as Guernsey, but they found new homes further afield and in hotter climes such as the island of Nevis. Somewhere there maybe something you can do about "sham" directors, however, they will keep popping up in new juridictions as soon as they feel any pressure. The added trouble is there is no sham, the nominees are real people and real appointed directors.
So what of quasi/de facto directors who manage to control the companies allegedly controlled by nominees? If HMRC were to track down these individual things would become more interesting, for all involved. Many companies might be exposed as being resident in the UK, there are issues of earnings and benefits, transfer of assets abroad and penalties.
There is also another angle, also not explored by the Panorama team, but very much the staple of the international tax avoidance industry. This is that many of the companies controlled by nominee directors happen to be wholly owned by offshore trusts settled by settlors 'unknown'. The unknown settlors many of whom are trustee companies located offshore is that they are in reality no different to the nominee directors that the Panorama programme exposed, although identities vary: this is a problem on a global scale.