Step aside Sir Philip – government appoints ANOTHER tax avoider to advise on cuts

20 08 2010

Since his appointment as the coalition government’s new ‘cuts tsar’, Sir Philip Green has rightly made unwanted headlines over his tax affairs.

Retail billionaire Sir Philip’s (entirely legal) tax schemes meant that he avoided paying an estimated £285m in tax in 2005 after he transferred control of most of his business empire to his Monaco-based wife for tax purposes.

Senior Lib Dems – in particular Vince Cable – are known to be privately angry at his appointment to advise the coalition on public sector efficiency measures.

But it turns out that Sir Philip is not the only tax avoider appointed by the government to advise on how to cut billions from public services.

Step forward Adrian Beecroft, one of four City high fliers recruited by George Osborne earlier this month to act as key figures on the government’s ‘independent challenge group’.

As the FT reported at the time, ‘The group’s brief is to “think innovatively about the options for reducing public expenditure”. It will perform a similar function to the “red teams” used by intelligence agencies to question key conclusions of analysts.’

The issue here is not Beecroft’s personal tax affairs – of which I know nothing – but the tax policies of the businesses he worked in and ran.

Beecroft was one of the founders of private equity firm Apax Partners. In 25 years at the group he served as chief investment officer and then senior managing partner before retiring in September 2008 – after Apax had acquired media group Emap in partnership with Guardian Media Group.

This Apax-GMG acquisition of Emap in 2008 adopted a curious structure. As the Guardian explained in an article in 2008, the deal involved a holding company that was to be set up in the tax haven of Luxembourg, which itself would own a number of companies located in another tax haven, the Cayman Islands.

The vehicle for the Apax-GMG bid for Emap was a company called Eden Bidco, incorporated in the Caymans in December 2007.

As the Guardian article explained:

‘The Apax Caymans structure at the time of the deal involved a complex network: Apax Nominees WW Ltd owned Eden Acquisition1 Ltd which owned Eden Acquisition 2 Ltd which in turn wholly owned Eden Bidco. The rate of corporation tax in the Caymans Island is zero.’

A GMG spokesman told the Guardian that the offshore structure had been created at Apax’s request.

While Emap’s operating profits remain taxable in the UK – unlike the bid vehicle, Emap itself is registered in this country, not the Caymans – the offshore structure carries ‘unspecified’ benefits for Apax, particularly if it sells its shares in the future, a typical mid-term strategy for a private equity firm.

As the Guardian continued: ‘The level of taxation payable on any capital gains made from selling shares could have a significant impact on the financial performance of the investment in Emap.

‘Should the Emap asset be sold in the future, a potential purchaser may also avoid stamp duty on any acquisition thanks to the offshore structure, which could have the effect of enabling Apax and GMG to achieve a higher price on any disposal.’

Apax did not comment on its Emap acquisition tax structure for the Guardian article. But it may not be just the Emap deal. A search of the Cayman Islands’ company register brings up the following firms, all registered in the Caymans, all with the name ‘Apax’:

APAX CAYMAN EIGHT LIMITED
APAX CAYMAN ELEVEN LIMITED
APAX CAYMAN FIVE LIMITED
APAX CAYMAN FOUR LIMITED
APAX CAYMAN NINE LIMITED
APAX CAYMAN ONE LIMITED
APAX CAYMAN SEVEN LIMITED
APAX CAYMAN SIX LIMITED
APAX CAYMAN TEN LIMITED
APAX CAYMAN THREE LIMITED
APAX CAYMAN TWELVE LIMITED
APAX CAYMAN TWO LIMITED
APAX CSG HOLDINGS LIMITED
APAX EUROPE VI NXP FOUNDER GP LTD
APAX EUROPE VI NXP FOUNDER L.P.
APAX EUROPE VI NXP FOUNDER MLP CO LTD
APAX FINANCIAL CORP 221135 -SO
APAX GLOBIS PARTNERS & CO., LTD.
APAX NXP US VII, L.P.
APAX PARTNERS & CO (GERMANY) II LTD.
APAX PARTNERS & CO (GERMANY) LIMITED
APAX QUARTZ (CAYMAN) GP LTD.
APAX QUARTZ (CAYMAN) L.P.
APAX US VII GP, L.P.
APAX US VII GP, LTD.
APAX US VII INTERNATIONAL PARTNERS, L.P.
APAX US VII, L.P.

Given the secrecy around Caymans-based companies, it’s impossible to say how many are owned by the Apax of government adviser Beecroft or how many were created before he retired, but it’s reasonable to assume that at least some of them are and were, given Apax’s use of a Caymans-based network for the Emap deal.

There is no evidence or suggestion that either Apax or Beecroft ever did anything remotely illegal. But nevertheless, we have Adrian Beecroft, a multimillionaire Sunday Times Rich List alumnus who ran a company that used offshore tax avoidance structures on his watch, now advising the government on how to cut public spending in a way that will almost certainly impact on frontline services and welfare for the poorest in society.

Incidentally, the other three City hotshots hired to the government’s ‘independent challenge group’ are:

  • Douglas Flint, finance director of HSBC
  • Richard Sharp, former head of the Goldman Sachs European private equity arm
  • John Nash, a founder of the Sovereign Capital buy-out group and chairman of private nursing home firm Care UK

Putting to one side the clear benefits Nash’s firm Care UK will draw from Andrew Lansley’s ‘denationalising’ of NHS service provision, I have no evidence that any of these individuals have personally or professionally engaged in any form of tax avoidance. None at all.

But if anyone else has, do shout.

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