The Bristol Cable

Properties owned by Bristol City Council are being leased to companies based in secretive tax havens, an investigation by the Cable reveals.

Illustration: Joshua Roberts (inkspillage.com)

Twenty-eight Bristol City Council-owned properties are leased to companies registered in offshore tax havens, from the micro-state monarchy of Liechtenstein to the island of Mauritius in the Indian Ocean. Combined, these leases are worth tens of millions of pounds.

Bristol isn’t alone in doing business with offshore companies. A Private Eye investigation in 2016 revealed that at least 41 local planning authorities across the country had leased or sold properties to companies based in tax havens in the decade up to 2015.

A range of council-owned properties are leased to offshore companies, from the Timpson’s building in Broadmead to the Hilton Hotel on Temple Way and Colston Tower. Bristol’s tallest building, Castlemead, on Lower Castle Street, is leased by Oval Properties 801 Limited, registered in Jersey. Meanwhile, the Georgian town house at 56 Queen Square is leased directly by council to Shreeji Properties Limited – registered in the island of Mauritius.

In some cases, leases were sold directly by the council to an offshore company. On other occasions, leases were transferred to an offshore company by the original leaseholder. Some of these deals are from 20 or 30 years ago, others were made as recently as 2017.

Should our local authority be doing business with secretive companies whose offshore structures can dodge Her Majesty’s coffers and disguise who truly owns them?

Bristol City Council owns around £200m in investment property in total and makes £11m in annual rental income from this portfolio. Given the budget cuts, it’s understandable the council wants to grow its income in this area. However, while the council gains, HMRC loses out on taxes that offshore properties can avoid, such as capital gains tax.

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“For councils to be doing business with offshore companies is a false economy,” George Turner from the Tax Justice Network told the Cable. “Councils rely on government money to top up any revenue they get from council tax and other sources. Any short term economic benefit they get will disappear when the tax losses to central government lead to cuts down the line.”

Furthermore, it’s hard for the council to know what, and who, is behind the company. “If the council is leasing out to an offshore company, it’s going to be very difficult to know who they’re actually leasing it to,” explains Kevin Bridgewater, researcher for campaign organisation Transparency International. “We’re not saying that all these companies are being used to launder the proceeds of corruption. That’s definitely not the case. But it’s just a risk and it’s difficult to find that out.”

The Cable contacted the council to inquire about what measures it takes to check prospective leaseholders, and whether it would be reviewing its policies in light of this information. The council responded with the following statement:

“Where we can, such as when assessing bids for new developments, we run the relevant financial checks on companies. However, with long term leaseholds we cannot always control whether these are transferred to different owners. Under existing UK law, the way a particular tenant company deals with its tax affairs is not a legitimate legal ground for us, or any landlord, to withhold consent to a lease transfer.”

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The council spokesperson added: “If a landlord does receive information that raises questions regarding tax then further queries would be raised with that applicant in this regard.”

The issue raised differing views among local politicians contacted by the Cable. Kerry McCarthy, MP for Bristol East, pointed out that tax investigations, and policy surrounding offshore finance, is a central government issue.

“I don’t think we can reasonably expect local councils to police this,” she said. “We need the government to act on tax loopholes, secrecy and the use of offshore tax havens which allow companies to avoid their responsibilities.”

However, Green party Member of the European Parliament for the South West Molly Scott Cato called for immediate action: “I would suggest that Marvin Rees needs to launch an urgent review into the practices of Bristol City Council with regard to offshore companies.

“It is essential that those who are responsible for public money set the highest standards and have no truck with the world of the McMafia.”

On January 15th, Green party councillor Martin Fodor cited this investigation when asking the Mayor whether the council’s ethical procurement standards are applied to property, and how the council can guard against doing business with these companies. The question was met with a flat response that it isn’t possible to introduce higher standards to its dealings in property.

The Cable understands that there is presently no formal strategy for the management of the council’s investment property portfolio. Despite the council’s assertions, now could be a perfect moment for the city to introduce safeguards into a policy. Could council lead the way by exploring all powers to prevent dodgy offshore companies from taking advantage of the city?

Data from property technology company Land Insight and the Private Eye was also analysed in this report. A special thanks to Christian Eriksson.