tax evasion

Labour given £4m from tax haven-based hedge fund with shares in oil and arms

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Original article by Ethan Shone republished from Open Democracy under a Creative Commons Attribution-NonCommercial 4.0 International licence. 

Hedge fund Quadrature Capital has given £4m to Keir Starmer’s Labour – the largest donation in the party’s history | Jack Taylor – WPA Pool / Getty Images

Quadrature’s donation is noteworthy not just for being Labour’s largest-ever, but for its timing ahead of election

The Labour Party’s largest-ever donation came from a Cayman Islands-registered hedge fund with shares worth hundreds of millions of pounds in fossil fuels, private health firms, arms manufacturers and asset managers.

While the £4m donation by Quadrature Capital is the sixth-largest in British political history, it is noteworthy not just for its size, but also its timing.

Electoral Commission records suggest Labour received the donation in the one-week window between former prime minister Rishi Sunak announcing the general election and the start of the ‘pre-poll reporting period’ in which all political donations over £11,180 had to be published weekly, rather than the quarterly norm.

This means that despite being made on 28 May, Quadrature’s generous donation was published by the Electoral Commission only last week, more than two months after Labour won the election.

Neither the Labour Party press office nor No 10 responded to openDemocracy’s questions on whether the timing of accepting this donation was intended to minimise scrutiny and critical coverage during the election.

Paul Holden, an investigative journalist and author of The Fraud, a forthcoming book on Starmer’s leadership, told openDemocracy that the donation’s timing fits the Starmer project’s pattern of delaying the disclosure of potentially sensitive or controversial political donations.

Holden said: “Sir Keir Starmer and the organisations close to him have an unfortunate history of reporting donations in controversial ways.

“During his bid to become leader of the Labour Party, Starmer refused to contemporaneously publish details of who had donated to his leadership campaign. His rivals, Rebecca Long-Bailey and Lisa Nandy, agreed to share details of their donors in real-time, which they published. Starmer, however, decided only to declare his donations via his MP’s register of interests, which created a significant lag between when Starmer accepted his donations and when they were made public.

“Labour members, as a result, had no idea at the time of voting that Starmer had been funded with large donations from the likes of wealthy millionaires like Martin Taylor and Sir Trevor Chinn and Baron Waheed Ali; the latter now at the centre of the furore about Starmer’s acceptance of gratuities.”

Holden also referred to a fine issued by the Electoral Commission to Starmerite think tank Labour Together in 2021 for its failure to declare donations worth more than £800,000 – including £730,000 received while it was under the directorship of Starmer’s key adviser and No 10’s director of political strategy, Morgan McSweeney.

openDemocracy has consistently reported on Labour’s increasingly strong ties with the financial sector in recent years.

The party has received more than £8m from businesses or people linked to the financial industry since Starmer became leader in 2020 and now boasts two multi-million-pound donors from the world of hedge funds; Quadrature and Taylor, who has managed several billion-dollar funds over his career.

While Quadrature had not donated to Labour before May, one of its senior employees has contributed significantly to the party under Starmer. Daniel Luhde-Thompson, a strategic adviser at the firm, has given the party more than £500,000 this year, according to the Electoral Commission.

Transparency campaigners have warned Quadrature’s huge donation raises questions about what the financial sector is getting in return.

Rose Whiffen, senior research officer at Transparency International UK told openDemocracy: “When the public see political parties relying on such large sums of money in donations from private sources, it understandably raises questions as to in whose interest politicians are working and can give the impression our democracy is for sale.

“More must be done to take this kind of big money out of politics. The new government should commit to introducing caps on individual donations to tackle this problem [and] restore public trust in how our democracy functions.”

Green Party co-leader Zack Polanski told openDemocracy that the donation shows Labour now “stands for multi-millionaires and billionaires over our working-class communities”.

Polanski said: “Far from being the party in service of working people, Starmer’s Labour Party seems indebted to the bankers and bosses who profit from pillaging our public services and our planet.

“Simply ‘following the rules’ and declaring donations isn’t enough to cast aside the doubts that the main parties have their loyalties tested by big donors. It’s time to implement strict rules on funding political parties, including a cap on how much any individual or business can donate to politics. Elections should be won by the people with the best ideas, not the parties with the biggest donors.”

Registered in the Cayman Islands

Quadrature Capital has a diversified share portfolio worth around $6bn, according to records filed with the US Securities and Exchange Commission (SEC) last month.

After its donation was made public last week, the firm shared a statement on its website.

It said: “In May 2024, we came to the view that a UK government with a commitment to the green transition of the economy would have the ability to drive change that is so urgently needed. Having analysed commitments set out by each party, we donated £4m to The Labour Party, in support of policies that will deliver climate action while also promoting social equity and economic resilience.

“This was a values-based donation, not a political donation, as Quadrature Capital Ltd remains non-partisan and apolitical. Going forward, our private giving will continue to be led by our values, and any further donations to political parties will depend on the parties’ commitments, track record and alignment with our mission for sustainable and equitable growth.”

Last year, the Guardian reported that despite donating to environmental charities through its climate foundation, Quadrature had holdings in fossil fuel companies worth more than $170m. The paper highlighted three holdings in particular with major polluters: ConocoPhillips, Cheniere Energy and Cenovus Energy.

openDemocracy’s analysis of the firm’s latest SEC filings shows that Quadrature has since increased its holdings in Cenovus, which was this year fined millions for an oil spill that released 250,000 litres into the Atlantic Ocean. Quadrature has scaled back its holdings with the other two firms but has taken up a major $67m stake in ExxonMobil, one of the largest oil and gas producers in the world.

Among Quadrature Capital’s other investments, its largest holding is in Apple, valued at $231m, and among its 10 largest holdings are other ‘bluechip’ stocks like Amazon, Shopify and Costco.

Quadrature also maintains significant holdings in the arms manufacturers Northrop Grumman ($31m) and Lockheed Martin ($6m); US private healthcare companies such as UnitedHealth ($31m) and HCA Healthcare ($16m); some of the largest asset management companies like Blackstone ($22m) and KKR ($7m), who potentially stand to benefit significantly from Labour’s plans to utilise private investment for infrastructure; and tech firms, including Palantir ($71m) and Oracle ($8m).

UK accounts filings for the firm show profits before tax of more than £230m in the financial year ending 31 January 2023, but paid corporation tax of only £5.3m. As is noted in the accounts, had the firm paid the standard rate of UK corporation tax of 19% during that period, this would have amounted to more than £43m.

The UK-based fund paid out £343m in wages last year – an average of £3m for each of its 113 employees – while back in 2021 one of its founders was eyeing a luxury central London penthouse valued at around £110m, according to a report by Bloomberg that cited “two people with knowledge of the transaction”.

openDemocracy can reveal that Quadrature was last year acquired by QC Ventures, a company registered in the Cayman Islands, which is now the 100% shareholder in the firm.

The Cayman Islands is a well-known tax haven, and the transparency requirements for companies registered there are much less than in the UK and most other countries.

Documents obtained by openDemocracy show that when QC Ventures was established in the Cayman Islands back in 2018, its directors were three senior directors at Quadrature and a corporate services provider based in Cayman.

Speaking in the Commons in July, Labour’s foreign secretary David Lammy pledged to tackle individuals and companies taking advantage of offshore tax havens “with full vigour”.

He added: “We were concerned that parts of the last government were turning a blind eye to these issues. I hope to come forward with further proposals in the coming weeks.”

When openDemocracy contacted Quadrature to ask about the donation and the acquisition by QC Ventures, a representative of the firm directed us to the statement on the company’s website. They also said the decision to set up a holding company based in the Cayman Islands to acquire Quadrature was not motivated by, or related to, taxation.

Robert Palmer, director of Tax Justice UK, said that “any company moving to a tax haven like the Cayman Islands has questions to answer” as the islands are “notorious for a lack of transparency and for ultra-low taxes”.

“Ultimately governments need to make sure that everyone is paying their fair share in tax, especially when public services are desperately in need of investment and we need to fund the transition to a greener economy,” he said.

Fran Boait, co-executive director at Positive Money, said: “In taking large donations from financial firms registered in tax havens, we have to question what influence the sector is getting in return.

“Labour’s plans to continue the previous government’s deregulation of the City of London are particularly concerning, especially when it has been shown that an oversized financial sector hinders rather than helps the rest of the economy.

“Labour should be looking at how to weaken the power of big finance in our democracy and economy. Right now it seems they are doing the opposite.”

Original article by Ethan Shone republished from Open Democracy under a Creative Commons Attribution-NonCommercial 4.0 International licence. 

Keir Starmer commits to play the caretaker role for Capitalism through the "hard times".
Keir Starmer commits to play the caretaker role for Capitalism through the “hard times”.
Continue ReadingLabour given £4m from tax haven-based hedge fund with shares in oil and arms

HMRC fines zero ‘enablers’ of offshore tax evasion in five years

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Original article by Ed Siddons republished from TBIJ under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

Experts say authority is failing to punish the architects of tax-dodging schemes

The UK’s tax authority has not fined a single “enabler” of offshore tax evasion or non-compliance in five years despite landmark powers introduced in 2017, new figures reveal.

Industry experts criticised HMRC’s approach as “bizarre” and “bloody pointless” in light of the data, which was released under freedom of information laws to the Bureau of Investigative Journalism (TBIJ).

They say it shows HMRC’s enforcement is failing to target the architects of offshore schemes while it aggressively pursues the clients, some of whom say they are the victims of schemes sold to them as lawful.

The findings follow revelations by TBIJ and the Observer that prosecutions for tax crimes have plummeted. HMRC has also not charged a single company or partnership for enabling tax evasion since laws introduced in 2017 provided expanded powers to crack down on the “enablers” of tax dodging.

Tax evasion and avoidance are key battlegrounds in the forthcoming election. Both Labour and the Conservatives have made ambitious pledges to raise billions through targeted pursuit of tax dodgers and the elimination of tax breaks for non-doms, people living in the UK who claim their permanent home is overseas.

“The neverending stream of new HMRC powers … are bloody pointless if the powers aren’t then used,” said Dan Neidle, the founder of the independent thinktank Tax Policy Associates and former head of tax at global law firm Clifford Chance.

He said in primarily penalising the taxpayers, who in some cases believed the schemes were legal because they were misleadingly marketed, HMRC is failing to address “the root source of the problem: the people offshore pimping these schemes”.

HMRC defines an enabler as “any person who knowingly helps their client to avoid or evade tax”. Targeting them, not just the tax evader, became a central pillar of HMRC’s strategy during the 2010s.

“Enablers were and still are a big focus for HMRC,” said Michelle Sloane, a tax disputes partner at law firm RPC. “But these figures show their rhetoric on tackling enablers … is clearly not being followed through with action.”

Before 2014, HMRC struggled to crack down on offshore tax dodging due to limited data on accounts overseas. But that year saw the approval by tax authorities around the world of the Common Reporting Standard, a measure that made financial institutions share information across borders. That allowed HMRC and other tax authorities unprecedented oversight of where taxpayers had stashed money overseas.

HMRC also began cooperating with other major tax authorities through the J5, a coalition of tax authorities founded to tackle tax evasion and money laundering.

Meanwhile, the revelations in the Panama Papers in 2016 marked a turning point in HMRC’s pursuit of the middlemen who helped to hide money from tax authorities. The offshore enabler penalty was introduced in 2017, alongside a raft of new powers to make it easier to punish perpetrators.

The penalty could include a £3,000 fine or 100% of the amount of tax that was dodged, whichever was larger.

See original article for embedded graphic. Embedded graphic has the title ‘

Offshore riches

Money held by UK taxpayers in foreign accounts outstrips a year’s worth of all tax owed in the country’

But the new figures show compliance enforcement is “not what you’d be expecting, based on their focus on enablers and all the sources of information that they have available to them”, said Sloane. “It’s an area I expect the next government will wish to concentrate on.”

Stephen Daly, a tax academic at King’s College London, called the lack of any offshore enablers penalties “bizarre”. “Why would the government want to introduce such a power only to leave it sitting idly by?”

The findings compound pressure on HMRC after revelations that the authority does not know how much is lost to offshore tax dodging each year.

HMRC estimates that it collects 95% of all the tax owed in the UK, but the remaining 5% accounted for about £36bn in lost revenue in 2021-22.

And figures HMRC disclosed to Tax Policy Associates in 2021 revealed that UK taxpayers held £850bn in foreign accounts in 2019, of which £570bn was in tax havens.

ExplainerTax avoidance vs tax evasion: what’s the difference – and which one is illegal?

However, HMRC said in a freedom of information response to the thinktank that it had not “produced or received any estimates” on how much is being lost to unlawful offshore schemes.

In June 2022, Lucy Frazer, then financial secretary to the Treasury, said HMRC would produce data on the “offshore tax gap” in 2023. But still no data has been published.

Whoever wins the election, some experts say they will need to make substantial investments in HMRC’s investigative teams if they want to raise funds for the public purse by closing the tax gap.

Commenting on the scale of revenue lost offshore, Dan Neidle said, “On the evasion side, we don’t really know, because we’ve got no data – [while] on the avoidance schemes offshore, HMRC seem ineffective at stopping the promoters.

“If it’s as much as single-figure billions, that’s a good result. But it’s going to take criminal sanctions on promoters to stop this.”

An HMRC spokesperson said: “We have a strong track record in tackling offshore non-compliance. Since the launch of our No Safe Havens strategy in 2019, we have secured almost £700m from offshore initiatives.”

Original article by Ed Siddons republished from TBIJ under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

Continue ReadingHMRC fines zero ‘enablers’ of offshore tax evasion in five years

Not a single company charged with tax evasion under stronger HMRC powers

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Original article by Ed Siddons republished from TBIJ under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

HMRC has not charged a single company under landmark legislation passed six years ago to crack down on corporate tax evasion.

Critics say the data, released after Freedom of Information requests by the Bureau of Investigative Journalism and TaxWatch, suggests that HMRC is undermining its own deterrents against corporate tax evasion by failing to use its criminal enforcement powers.

Margaret Hodge MP called the findings appalling and said the lack of enforcement had rendered the law “a paper tiger.”

The Criminal Finances Act 2017 introduced new powers to charge companies and partnerships operating in the UK that failed to stop their employees or associates from facilitating tax evasion, regardless of where in the world the tax was evaded.

One part of the new law, known as the Corporate Criminal Offences clause, drastically lowered the bar for prosecuting businesses that enabled tax evasion. It introduced “strict liability”, meaning that a company cannot plead ignorance of the wrongdoing to evade a criminal charge, and prosecutors do not have to prove intent in order to secure a conviction.

It also threatened unlimited fines in the case of established wrongdoing. Companies can avoid punishment if they have reasonable procedures in place to prevent the facilitation of tax evasion.

The law both made criminal prosecutions easier to pursue and strengthened the penalties. But critics say the refusal to charge a single company has cast serious doubts on the landmark legislation.

TBIJ, TaxWatch and The Observer previously revealed that the number of concluded prosecutions after HMRC investigations had fallen by more than two-thirds in five years, with only 11 wealthy taxpayers prosecuted in 2022.‘A deterrent that you never use is no deterrent’

“The lack of any Corporate Criminal Offence prosecutions is, I think, quite serious,” said Dan Neidle, founder of Tax Policy Associates and formerly head of tax at Clifford Chance. “A deterrent that you never use is no deterrent.”

Criminal penalties were the only reliable way to change behaviour, while the overreliance on civil penalties and fines often failed to curb serious wrongdoing, Neidle said. “If you disarm yourself and don’t use the criminal tools that you have available, then you are missing the trick.”

A spokesperson for HMRC said: “Corporate criminal offences were introduced to encourage organisations to put preventative measures in place to stop tax evasion. Our efforts have helped drive a corporate culture shift towards anti-tax evasion awareness, which has led to new procedures across business sectors.”

HMRC told TBIJ it has 11 live investigations and is looking into a further 24 possible cases. It has also reviewed and rejected an additional 94.

Hodge said: “We are in the midst of a cost-of-living crisis, and tax evasion is costing our economy billions each year. So it is appalling that HMRC has failed to prosecute a single enabler of tax evasion.

“We know that there continues to be a whole industry that supports those who don’t want to pay their fair share of tax. We cannot drive cultural change in that industry if its members are under the impression that this offence is just a paper tiger.”

HMRC prioritises the recouping of money lost to tax avoidance and evasion through civil settlements rather than prosecutions, according to Robert Palmer, the director of Tax Justice UK. He cited the risk and cost of prosecuting powerful opponents with deep pockets.

“HMRC is routinely outgunned by the private sector,” he said. “It’s a real problem, because the minute you go against someone who’s rich, they can lawyer up and drag things out. HMRC are outmatched … particularly when it comes to the professional enablers and facilitators.”

Other legislation with similar “failure to prevent” clauses has resulted in charges and convictions. The UK Bribery Act 2010 made it a crime to fail to prevent bribery and has led to high-profile prosecutions, including the oil and gas company Petrofac in 2021.

The realistic threat of criminal prosecutions means “the Bribery Act continues to be taken very, very seriously,” said Neidle, “whereas the Criminal Finances Act is dropping off the radar.”

Susan Hawley, director of Spotlight on Corruption, said: “Legislation only has a deterrent effect for so long without any meaningful enforcement.

“The government urgently needs to get to the bottom of whether this lack of prosecutions is related to failures of political will or resourcing issues at HMRC, or deeper problems with the wording of the offence.”

Original article by Ed Siddons republished from TBIJ under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

Continue ReadingNot a single company charged with tax evasion under stronger HMRC powers

Zahawi’s tax evasions point to a more fundamental problem for the Tories

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https://morningstaronline.co.uk/article/e/zahawis-tax-evasions-point-more-fundamental-problem-tories

TORY chairman Nadhim Zahawi’s tax problems are a bigger headache for the Prime Minister than he has yet acknowledged.

Zahawi pleads that it was mere carelessness that saw him forced to pay HMRC nearly £5 million in unpaid tax (inclusive of a penalty) while he was, er, the Chancellor of the Exchequer.

Financial sloppiness isn’t a great look for a chancellor, but in Zahawi’s defence he’s admitted to it before. It was after all a “genuine mistake” that saw him claim thousands in expenses to heat the stables for a horse-riding school on his Warwickshire estate.

…

Labour rails at Conservative “corruption and cronyism,” but the fundamental issue is more basic still. This is a government of the rich, for the rich, by the rich and it is making us poorer.

…

https://morningstaronline.co.uk/article/e/zahawis-tax-evasions-point-more-fundamental-problem-tories

Continue ReadingZahawi’s tax evasions point to a more fundamental problem for the Tories

Nadhim Zahawi ‘agreed on penalty’ to settle tax bill worth millions

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https://www.theguardian.com/uk-news/2023/jan/20/nadhim-zahawi-agreed-on-penalty-to-settle-tax-bill-worth-millions

The Conservative party chair, Nadhim Zahawi, agreed to pay a penalty to HMRC as part of a seven-figure settlement over his tax affairs, the Guardian has been told.

The former chancellor, who still attends the cabinet, has been subject to extensive questions in parliament and the media in recent days after it emerged he agreed to pay millions to HMRC in December after a settlement with the tax agency.

The Guardian has now been told that the former chancellor paid a penalty imposed by HMRC – part of an estimated £5m tax bill.

Penalties are applied if someone does not pay the correct tax at the right time.

Asked repeatedly about the penalty, Zahawi’s spokesperson did not deny one had been paid. Nor did they offer any explanation or clarification about the sums involved.

…

https://www.theguardian.com/uk-news/2023/jan/20/nadhim-zahawi-agreed-on-penalty-to-settle-tax-bill-worth-millions

How I cost Nadhim Zahawi £3.7million

The former chancellor’s tax avoidance scheme, which has left his political career in the balance, was uncovered by an independent tax expert who Zahawi then tried to frustrate through legal means. Here’s how he did it

DAN NEIDLE

Continue ReadingNadhim Zahawi ‘agreed on penalty’ to settle tax bill worth millions