The Bristol Cable

The Cable investigates how the world of offshore finance reaches out and touches on our doorstep

Words: Alec Saelens, Lucas Batt, and Sid Ryan

Research & Map: Lucas Batt and Alec Saelens

Locations of companies, shareholders, and countries of residence with connections to Frank Le Marec, including those linked to Bristol.

(© OpenStreetMap contributors, © CartoDB, © Mapbox)

In the quiet South Gloucestershire town of Bradley Stoke, just north of Bristol, lies a house with an unusual distinction. The abode at 31 Arden Close appears in the Panama Papers, the largest leak of offshore finance data in history, and is also the registered address of 126 UK companies.

Nothing on the outside gives a hint of corporate activity: no rows of cars, no plaques by the door, just a new-build house acting as a postbox. The property is owned by the Phillips family, who own and run Ordered Management Limited, a business offering company formation and management services. Recently retired, Derrick Phillips passed on the directorship to his son Robin. The company offers to take on, for a fee, the bits of administrative paperwork UK companies are legally required to provide to Companies House, the UK’s company registration office.

These official filings are used by HMRC to determine profits and taxation, and by financial regulators to track down rogue company directors. These are exactly the kinds of filings that are missing when you start looking for companies registered in tax havens.

Where offshore finance is involved nothing is ever quite as it seems. While much of Ordered Management’s business is with small Bristol companies, eyebrows start to raise when the company website also boasts of clients from over 50 countries, including from known tax havens such as the British Virgin Islands, St Kitts & Nevis, Belize, and the Seychelles.

The intrigue of Frank Le Marec

Arden Close is in the Panama Papers because of one man: Frank Le Marec. He is listed there as a shareholder of British Virgin Islands registered Diorrigan Ltd, and as beneficiary of Walkinson Associates and Lhost Services, both based in the Bahamas, with his registered address as 31 Arden Close.

This international man of mystery is a French national who has at various times declared his country of residence as France, Hong Kong, Latvia, Tunisia, and the UK. Back to Bristol, he has used Ordered Management as a corporate officer and registered address for at least 22 of his companies.

Le Marec is not the Phillips’ typical client. In fact, he also works in company formation, but his specialty is in offshoring. Le Marec’s main company is ICD London, established and run by him since 2006. ICD “offers offshore services to companies and individuals in European and international tax havens” and claims to “grow clients’ business and individual wealth” through a network of bankers, fiscal experts, lawyers and consultants in 25 countries around the world.

Reports have already revealed how some of the richest men with links to Bristol are involved in the secretive practice. Stephen Lansdown, who lives in the Guernsey tax haven, is a major shareholder in companies registered in the British Virgin Islands, ultimately parent companies of Bristol’s Rugby Club, Bristol Flyers and City F.C.Aaron Banks, Bristol businessman, who owns a British Virgin Island registered company linked to Gibraltar, donated £1m to UKIP and co-chair of pro-Brexit campaign group Leave.eu.

Its promotional material reviews offshore jurisdictions on the merits of “where taxation is reduced or non-existent and the beneficiaries can benefit from an anonymity”, or where the duty to file accounts is absent.

Le Marec and the Phillips family have had numerous business dealings, conducted at arms-length through their corporate proxies. Robin Phillips was director of Infosia Ltd, acting for its Hong Kong parent, ultimately controlled by Le Marec. Over an eight-month period in 2013, ownership of Infosia transferred from Hong Kong into the Phillips’ corporate network and then back into the hands of Le Marec himself. It is unclear what sparked this flurry of activity for what is recorded as a dormant company with net assets of a paltry £100.

When the Cable asked Robin Phillips about his company and its relationship to Frank Le Marec, he says: “We have never advised anyone to set up structures designed or intended to avoid lawful taxation.” But he adds: “People do not always tell us the truth.”

Everyday offshore

Le Marec has made use of his own expertise in offshore finance through a web of companies registered in Panama, Bahamas, Cyprus, Delaware, Gibraltar and the Seychelles.

One common loophole is the use of the UK’s limited liability partnerships’ (LLP) corporate structure, which makes it easy to transfer funds abroad. Unlike other companies, LLPs aren’t taxed on the profits they make. Only the members (or shareholders) of the LLP are taxed on the profits they receive. So when the owner is based offshore, things get complicated.

In theory the tax authority in the country in which profits are received collects any taxes owed, but if someone is based in a country with a 0% tax rate like the Seychelles then there isn’t anyone collecting tax. Dr Mary Young, a researcher into transnational organised crime and financial crime in offshore financial centres at UWE, explains that tax havens “operate a legal system that creates a veil of secrecy to obscure the identity of those establishing companies, usually for the benefit and use of people or companies that are not resident there.”

The Cable discovered that two corporate members – based in the Seychelles – of one of these LLP structures were signed for by Le Marec himself. Figures from the UK part of the LLP structures suggest that £170,000 of UK made profits were transferred to his offshore companies. When contacted by phone Le Marec declines to comment; nor does he reply to a subsequent email.

The sums involved in the above example may seem small but they are indicative of what how such schemes function, and how difficult it is to follow the money. A 2016 Oxfam report, ‘Ending the era of Tax Havens’ estimates that the UK loses £5billion a year in tax receipts due to offshore schemes. There is no suggestion of illegality by either the Phillips family or Frank Le Marec, but the shadowy world of offshore dealings revealed by the Panama Papers are bound to raise questions about such arrangements.

While people responsible for offshore activity defend the practice as a way to save assets and secure investments by ‘reducing tax liability’, the arguments against offshoring point to people abusing the lack of transparency in order to not declare their full wealth or property and evade their local tax system. Acknowledging the blurred lines between evasion and avoidance, Dr. Young affirms: “If you are too aggressive in the way you use tax avoidance techniques then HMRC will catch up with you.”

The Bristol Cable will continue to investigate offshore schemes with links to Bristol.