New equity fund firms shelved
SNP MP warns proposed firms may be open to criminal abuse
A PROPOSED new kind of British firm has been shelved amid SNP concerns that it could be open to the same criminal abuse as Scottish limited partnerships (SLPs).
The UK Treasury plans to introduce a special corporate vehicle for equity funds with some of the same characteristics as SLPs
However, a House of Commons committee has put the launch of so-called deregulated private fund partnerships (PFLPs) on hold pending the outcome of a separate and ongoing consultation on reforms to the Scottish firms.
The move comes after Nationalist MP Roger Mullin convinced Conservative and Labour colleagues of the dangers of exposing the new firms to the same risks of abuse as the Scottish equivalents.
The Treasury had announced plans for its PFLPs on the same day that another ministry, the Department for Business, Energy and Industrial Strategy (BEIS), had begun its review of SLPs. The Commons Committee on Regulatory Reform in an official report described this as “not a good example of joined-up government”.
Mr Mullin said: “This report concludes that the Government has not been joined up in dealing with their proposal to create a new type of Limited Partnership. Indeed in the course of recent months I have had to liaise with three departments – Treasury, BEIS and Home – who often were unaware of what others were doing.
“I am pleased that the committee came around to my point of view that this order to create a new type of limited partnership for private fund managers should not proceed until the review of SLPs is completed and lessons drawn.
“This makes sense as we try to prevent such limited partnerships from being exploited by criminals as has too often been the case with SLPs.”
Over the last two years The Herald has named scores of SLPs involved in criminal or unethical behaviour, including serious corruption in the former Soviet Union, fronting sites providing child pornography and bootlegged videos and money-laundering.
Security minister Ben Wallace described the revelations in The Herald as “very concerning” and confirmed they tally with information from law enforcement sources.
SLPs are widely advertised globally as shell companies which can have secret owners, pay no taxes and file no accounts.
However, they are also popular with overseas investors and equity funds as tax-efficient vehicles.
MPs do not oppose this use, nor the similar role envisaged for the new PFLPs.
Andrew Bridgen, who chairs the committee, described the Treasury proposals as “essential”.
But he added: “The Government’s timing has been unfortunate, with the Treasury putting the plans forward on the same day that BEIS launched its consultation.
“It would be sensible for ministers to only proceed once they have received convincing assurances from the consultation that there are no wider issues to address.”
Mr Mullen first raised concerns about PFLPs in The Herald’s Agenda column.