Paradise Papers: Queen’s non-public property invested £10m in offshore funds

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About £10m of the Queen’s non-public cash was invested offshore, leaked paperwork present.

The Duchy of Lancaster, which offers the Queen with an revenue, held funds within the Cayman Islands and Bermuda.

A small quantity ended up within the firm behind BrightHouse, a series accused of irresponsible lending, and Threshers, which went bust owing £17.5m in UK tax.

The Duchy mentioned the BrightHouse holding now equates to £three,208 and it was not concerned in fund funding choices.

It added it had been unaware the shops featured within the investments.

The chief finance officer of the £500m property, Chris Adbad, instructed the BBC: “Our funding technique relies on recommendation and advice from our funding consultants and acceptable badet allocation…

“The Duchy has solely invested in extremely regarded non-public fairness funds following a robust advice from our funding consultants.”

A spokesperson for the Duchy of Lancaster added: “We function various investments and some of those are with abroad funds. All of our investments are absolutely audited and bonafide.

“The Queen voluntarily pays tax on any income she receives from the Duchy.”

Duchy’s status

Details in regards to the Duchy’s investments got here to gentle within the Paradise Papers – a leak of 13.4m paperwork from firms together with Appleby, one of many world’s main offshore regulation corporations.

The two funds had been based mostly in British abroad territories with no company tax on the centre of the offshore monetary business.

But the Duchy mentioned it was not conscious there have been tax benefits to it from investing in offshore funds, including that tax technique was not part of the property’s funding coverage.

The paperwork present the Duchy of Lancaster put £5m within the Jubilee Absolute Return Fund Limited in Bermuda in 2004, with the funding coming to an finish in 2010.

In 2005 the Duchy agreed to place $7.5m (£5.7m) within the Dover Street VI Cayman Fund LP.

Documents present the fund invested in medical and expertise firms.

The connection to rent-to-buy agency BrightHouse started in 2007 when the US firm operating the fund requested the Duchy to contribute $450,000 to 5 tasks, together with the acquisition of the 2 UK High Street retailers.

This included an curiosity in London-based non-public fairness agency Vision Capital, the corporate which acquired 100% of BrightHouse and 75% of the house owners of Threshers off licence chain.

Under its new house owners, Threshers’ steadiness sheet was loaded with debt and it paid no company tax for 2 years. When the drinks retailer went bust in October 2009, nearly 6,000 folks misplaced their jobs.

The majority of Vision Capital’s BrightHouse funding later ended up in an organization based mostly in Luxembourg and it started paying much less company tax within the UK.

Last month, the UK’s monetary regulator, the Financial Conduct Authority, mentioned BrightHouse, which sells electrical items and furnishings predominantly to folks on decrease incomes by way of weekly installments, had not acted as a “responsible lender” and ordered it to pay £14.8m compensation to 249,000 clients.

The Duchy mentioned its funding within the Cayman Islands fund is because of proceed till 2019 or 2020 and quantities to zero.three% of the whole worth of the property, whereas its curiosity in BrightHouse now equates to only zero.0006% of its wealth. The Duchy didn’t present a determine for its curiosity in Threshers.

A Vision Capital spokesperson mentioned: “Vision Capital complies with all laws and regulations and pays its tax in full and on time. Any suggestion to the contrary is wrong.”

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The Jubilee Absolute Return Fund Limited was based mostly in Bermuda, a British abroad territory

The Duchy’s 2017 annual report says it “gives ongoing consideration regarding any of its acts or omissions that could adversely impact the reputation of the Duchy or Her Majesty The Queen”.

Labour MP Margaret Hodge, the previous chair of the Commons Public Accounts Committee, mentioned she was “pretty furious” with the Queen’s funding advisers, saying they had been bringing her status into disrepute.

“It is so obvious that if you’re looking after the money of the monarchy, you’ve got to be actually cleaner than clean and you must never go near the dirty world of money laundering, tax avoidance, tax evasion or actually making money in dubious ways,” she mentioned.

‘Preying on the weak’

The enterprise mannequin of BrightHouse has lengthy come below the highlight.

A parliamentary report in 2015 mentioned the corporate was charging rates of interest of as much as 94%. One in 5 clients had been in arrears and one in 10 purchases led to repossession. In one case examined by MPs and Lords, a Samsung freezer price £644 to purchase in John Lewis however £1,716 below a five-year plan from the chain.

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BrightHouse maintains it’s a accountable lender and thru its 300 shops offers a providers to tens of millions of Britons who’re unable to entry up conventional traces of credit score.

But it was attracting consideration on the time of the Duchy’s funding – with the Financial Times difficult its chief govt in November 2008 to reply to accusations that the chain was “preying on the vulnerable”.

Project Bertie

Vision Capital introduced it was buying the stakes in BrightHouse and Threshers in June 2007.

Source paperwork

The offshore leaked paperwork present the Duchy of Lancaster was amongst 46 traders within the $312m Dover Street VI Cayman Fund LP.

In September 2007, traders had been requested to pay 6% of their monetary dedication into 5 investments, together with “Project Bertie”.

The traders had been instructed Project Bertie was fashioned to take an curiosity in an organization arrange by Vision Capital to “acquire a portfolio of two retailers in the United Kingdom”.

The Duchy of Lancaster’s $450,000 dedication to the “capital call” is listed within the paperwork.

Another doc exhibits the funding in Jubilee Absolute Return Fund.

Full disclosure

Established greater than 700 years in the past, the Duchy of Lancaster has a business and residential property portfolio and monetary investments.

Its primary goal is to supply revenue for the Queen, who is called the “Duke of Lancaster”.

Although the Duchy will not be topic to tax, since 1993 the Queen has voluntarily paid tax on any revenue she receives.

The Duchy’s annual report and accounts embrace a abstract of its holdings and monetary efficiency and are put earlier than Parliament. The offshore investments weren’t referenced within the studies however there is no such thing as a requirement for particular particulars of the Duchy’s holdings to be disclosed.

Dave McClure, the writer of a guide in regards to the wealth of the Royal Family, instructed the BBC “strain will develop on the Duchy to divulge heart’s contents to correct parliamentary scrutiny by the National Audit Office, which they’ve resisted for many years.

“The resolution to the issue is likely to be simply full disclosure, so everybody is aware of what investments they’re investing in.”

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The Duchy mentioned the Queen “takes a keen interest in the Duchy’s estates and tenants” however “appoints a chancellor and the Duchy Council to administer the affairs of Her Duchy. The chancellor delegates the oversight to the Duchy to the Council”.

Investors within the Dover Street VI Cayman Fund LP made a dedication for a “given period” and are “not party to its ongoing investment decisions” or the place cash is “ultimately invested”, it added.

Asked whether or not the Duchy had different investments in offshore funds, it mentioned it “currently invests in a fund domiciled in Ireland”.

The Chancellor of the Duchy of Lancaster is a authorities minister and sits within the cupboard, however performs a nominal position in operating the property. The present chancellor is Sir Patrick McLoughlin MP, the Chairman of the Conservative Party.

At the time the Duchy initially invested within the Dover Street VI Cayman Fund LP in September 2005, its chancellor was Labour MP John Hutton.

Ed Miliband was the chancellor of the Duchy on the time the decision got here to put money into the corporate taking up BrightHouse and Threshers. Coincidentally in 2016, the previous Labour chief known as for higher regulation on buy-to-rent corporations akin to BrightHouse in a movie for the BBC’s Victoria Derbyshire programme.

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