SNP moves to close Scottish tax haven loophole in Westminster

THE SNP will seek to close Scotland’s “tax haven” loophole in Westminster, the Sunday Herald can reveal. Scottish politicians from all parties have become increasingly alarmed that shell companies registered north of the Border are being exploited by money-launderers and tax evaders.

This newspaper has revealed a huge boom in once-obscure Scottish limited partnerships, or SLPs, advertised across Eastern Europe as “zero-tax companies”.

Such businesses have been implicated in serious corruption cases in Ukraine and Latvia and the wholesale looting of Moldova’s banking system. Last week, mafia watchers in Kiev said Scotland was becoming a money-laundering base for former Soviet gun-runners.

Now the SNP’s Treasury spokesman in Westminster, Roger Mullin MP, has said he will table an amendment to the UK Government’s Finance Bill to try to force reform.

Mullin said: “While they have many legitimate purposes, there is enough evidence implicating SLPs in dodgy tax arrangements that gives me and many others cause for concern.

“At the very least, there should be a full review of the way in which Scottish limited partnerships operate. That review should take full account of the views of the Scottish Government, and of charities who have evidence to present. It should come forward with robust recommendations about how to limit the potential for tax impropriety.”

Scottish Finance Secretary Derek Mackay earlier this month wrote to the UK Government calling for action on SLPs. Justice Secretary Michael Matheson had previously been in touch with his counterparts in Westminster.

A spokeswoman for the Department for Business Energy and Industrial Strategy, referring to correspondence from Mackay, said: “We have received the letter and will respond in due course.”

Other politicians have condemned SLPs. Green MSP Andy Wightman has warned SLPs “threaten to tarnish the reputation of Scotland as a place to do legitimate business”. Liberal Democrat MSP Liam McArthur warned such brass plate firms could turn Scotland in to the “Panama of the North”. Labour’s Jackie Baillie said reform had taken far too long since her predecessor Hugh Henry warned of the consequences for Scotland of the Moldovan bank allegations as long ago as early 2015.

There is a small cottage industry where bona fide Scottish lawyers use SLPs as tax-efficient vehicles for equity funds and other investors. Far more SLPs are created by company formation agents outside Scotland and then marketed off-the-peg in other countries, often through intermediaries in the Baltic states where the banking system has come under huge scrutiny for allegedly facilitating money-laundering.

Mullin added: “It has been reported that a staggering 95 per cent of SLP registrations in the year to April 2016 had faceless offshore corporations for partners, creating an ideal terrain for financial crime to flourish.

“But despite what the name suggests, Scottish limited partnerships have very little at all to do with Scotland. Introduced by the UK Government in 1907, the regulation, operation and dissolution of SLPs remains the exclusive preserve of Westminster.

“The Scottish Government and others may certainly make representations to the Treasury on the governance of company law but it is incumbent upon the UK Government to actually do something about it.”

SLPs, meanwhile, are not subject to UK reforms designed to ensure that the ultimate controlling interest of a company is publicly known.