The offshore companies buying Bristol – courtesy of our council

Bristol City Council have made an estimated £126m from leasing properties to secretive offshore registered companies based in the Isle of Man, Jersey, the British Virgin Islands and Guernsey.

Bristol and Beyond 26th November, 2015

Alon Aviram

Secretive offshore companies are leasing properties from Bristol City Council.

Words: Alon Aviram

Photo: Edwin Cheung

Bristol City Council have made an estimated £126m from leasing  properties to secretive offshore registered companies based in the Isle of Man, Jersey, the British Virgin Islands and Guernsey.

The Cable obtained a list of  Council owned properties that are leased for capital appreciation – held for making money not service provision. This list was  matched with land registry data, showing council properties are leased to offshore companies.

The scale of offshore property ownership in the UK was recently exposed following an investigation by Private Eye, showing that over 100,000 UK addresses are owned by companies in offshore jurisdictions.

From complex financial structures designed for tax reductions to shell companies that disguise their true owners, the use of offshore companies for tax purposes and money laundering is increasingly coming to light. But the fact that local authorities are leasing to offshore companies has been overlooked.

Bristol City Council told the Cable that they carry out checks before leasing including a request for “the last three years of properly audited accounts” and “an interview to establish their previous experience and suitability as tenants”. Quite how they interview anonymous shell companies, who potentially use nominee directors, and are registered to places like the British Virgin Islands, remains unclear.

Why is this a problem?

There isn’t any evidence to suggest that Bristol Council are leasing to companies guilty of illegal practice. But can the council confidently claim that the offshore leaseholders they work with are above board? This is a tall order as the Land Registry doesn’t enforce transparency over who owns the companies buying up swathes of Bristol and the UK.

Speaking to the Cable, Kevin Bridgewater,  researcher for Transparency International, said:

“The secrecy in those jurisdictions means that it’s very difficult if not impossible to know who actually owns a company. So 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. 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.”

A 2015 report by Transparency International reported that £180m worth of property in the UK has been brought under criminal investigation as the suspected proceeds of corruption since 2004. This is believed to be only the tip of the iceberg of proceeds of corruption invested in UK property. Over 75% of the properties under criminal investigation use offshore corporate secrecy.

In a speech earlier this year, David Cameron said that he would “open up a new era of corporate transparency”. But that pledge already looks like it won’t stick, with International Development Minister, Grant Shapps, recently letting the Cayman Islands wriggle their way out of having to compile a registry of beneficial ownership.

So while it’s admirable that Bristol Council aim to conduct due diligence checks on those they lease to, the extent to which this is possible when dealing with offshore companies is clearly limited. The question is, how cautious are local authorities prepared to be when offered attractive investment opportunities?