• Tories claim to be on the offensive over tax avoidance
  • But #1 donor running secretive Bermuda hedge funds
  • Territory snubbed David Cameron over tax deal last week

Hamilton, Bermuda

In the wake of the G8 summit (and a controversial donation to the Labour Party in company shares) the Tories have become complacently smug when it comes to tax avoidance.

Indeed, Tory whips are even handing out lame patsy questions for PMQs:

Mr Marcus Jones: I welcome the prime minister’s leadership on getting the G8 to agree a deal on tackling aggressive corporate tax avoidance. Will my right honourable friend confirm that we won’t be offering a corporate tax avoidance service as does the party opposite?

In the spirit of leadership so admired by obliging backbenchers, perhaps the prime minister can ask Michael Farmer, the Tories #1 donor, former party co-treasurer and now board member, why he is linked to at least six hedge funds operating out of Pembroke?

That’s not Pembroke, West Wales but Pembroke, Bermuda — a country which snubbed David Cameron’s entreaties over tax avoidance just last week.

When not giving the Tories £4.9 million or paying for his son to join the Bullingdon Club, “Mr Copper” runs the extractive commodities-focused hedge fund RK Capital Management.

While ostensibly being managed from New York and London, filings with US regulators indicate that portions of the company’s leading offering, the Red Kite hedge funds, are operating out of the tax haven (click links below for SEC filings):

With his new found enthusiasm for stamping out tax avoidance, doubtless David Cameron will be enquiring as to the purpose of these arrangements shortly.

  1. horsetraders says:

    This is the problem with hitting out at stories where no one has done wrong – someone will find another story where no one has done anything wrong and hit back at you.

  2. horsetraders says:

    of course the Labour one is more of a story as they themselves had been attacking companies for doing what they should be doing.

    what a delightful pantomime.

  3. Kevin Taylor says:

    You’ve unfortunately fallen for the standard normal lazy journalist line and consequently the facts of your story are 100% falacious.

    Funds themselves do not pay tax. You can confirm this for yourself by looking at the accounts of any typical UK hedge fund, investment trust, unit trust, etc etc etc. Funds do not pay tax, investors in funds DO pay tax.

    So given that UK funds do not pay tax then exactly what tax has been “avoided” as a consequence of these funds being established in Bermuda? The answer is obvious: no tax has been avoided as there was no tax to pay to begin with.

    Sadly you’ve seen “Bermuda” and then written a bile-filled rant without actually thinking about the topic. Go straight to the bottom of the class, 2 out of 10, must try harder!

  4. You’ll notice that the companies are incorporated in Delaware. You’ll get more information out of Bermuda.

  5. @Kevin Taylor: What is the purpose, then, of maintaining a presence in Bermuda at great expense? Why not operate out of London or NYC?

    Whether or not funds themselves pay tax is a red herring when the secrecy afforded by popular legal vehicles can facilitate tax avoidance for investors.

    Bermuda, where some of the above funds are based as their “principal place of business”
    * does not maintain company ownership details in official records
    * does not require country-by-country financial reporting by companies
    * does not require resident paying agents to tell the domestic tax authorities
    about payments to non-residents
    * does not participate fully in Automatic Information Exchange such as the European Savings Tax Directive

    Delaware, where some of the above funds are incorporated, is seen to rival many offshore jurisdictions in terms of privacy.

  6. @ Kevin Taylor

    Have you any evidence to prove that the clients of the hedge funds based in offshore countries do pay their tax?

    Isn’t that the point of being offshore – no evidence! How would tax authorities in the UK know what was due from whom if secretive clients (or their nominees) don’t declare their income!

  7. Kevin’s right. What a load of horsesh*t you lot just don’t understand how hedgefunds/PE houses are structured or work. I help setup arrangements like these b/c of the stupid regulatory approach adopted by the UK and US. Everyone starts out small, trying not to get crushed by the big banks. It either you play on the fringes and then come out swinging with a trading strategy which works or the existing players just di*k on you into oblivion. Tax, that’s just a side benefit if we can get it (but hey you guys ‘voted’ these geniuses in!). As an Ozzy, I was amazed at the level of DUMBness of the UK’s politicial approaches to tax/reg/IT reform back before the crash happen in 07, asking why is this still allowed?
    Guess what,after 07/08 not only was there tax fall out, but there was a bigger AML fall out with the big banks ignoring the AML laws and just getting a slap on the wrist from the FSA/FCA but a massive kick in the ass from the US regulators. Sorry Poms, but you really need to get some balls and take HSBC/Standard Chartered/Barclays/GS/BGC to task, but none of you will b/c the people who understand CLO’s have just left the building with your money (look at your pensions… the hole is big.. but actually it’s bigger than you realise).
    Secrecy is key, b/c we’re not just dealing with tax, we’re dealing with people who source money from all sorts of places… places which have Oil, Diamonds, and other goodies made of blood. Think about it – if money is flowing at £1 from these goodies, tax of 20-30p/£ is not the priority – washing the 70p of lady MacBeth’s stain is.
    If you think a ‘Tory’ donor has a clue why its from Bermuda… good luck. They all come to the lawyers/accountants and say I want to trade X, give me a structure that you give to everyone else and we do (sending them an appropriately sized bill as well)
    And Lawrence – the cost of setting up Bermuda/Caymans and maintaining it is just dirt cheap compared to London/NYC – you get over priced bean counters like me to deal with. Once again.. a REGULATORY requirement (Fortunately I can still structure out of them). In any case, there are two very simple solutions which you poms need to adopt
    – Bring in solid principals based legislation treating corporations and people the same on a single tax approach – The UK/US approach is just dumb and doesn’t equip your tax authorities with the ammo it needs. (Try reading the GAAR policy document- what a farce; once again the politicians were too dumb to recognise that Graham screwed them)
    – IT overhaul. Data exchange of every bank transaction through the UK is recorded with the FCA/HMRC/Treasury/PRA and overlayed with algorithms for flagging ‘anomalies’. But being poms you’d whinge that it’s just ‘Orwellian’. Basically suck it up or lose it. Information is key – if Oz/Nz/China/Sing /HK you can do it here.

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