As a Barrister and Asset Manager it was common in the industry to have BVI or Cayman based fund or investment companies. I was reminded by a journalist last week just how even common business practices in the legal and financial services industry have changed since the credit crunch; such that even Cayman Island Hedge Funds are now sneered at.
I was also reminded that mischief is easy to make through innuendo and that if you have a public profile and want to represent your community, you not only have to do the right thing (which is easy) but be seen to go out of your way and be ‘whiter than white’ to do the right thing (by not giving ammunition to mischievous minds).
So if you come from financial services like me and have had BVI companies – how do you change with the times in the new era of taxation?
First, of course don’t have any hidden assets, bank accounts – that’s the easy one – that’s just plain illegal. And it goes without saying even in financial services that is not acceptable. (Of course the innuendo that you have a BVI or Cayman or other offshore company – and so must by definition be a tax-dodging billionaire child murder will stay with you).
Second, make your overseas company UK tax resident by having its management and control in the UK (as I have always done). This keeps you morally correct in the new era of tax morality.
Third, so why have an overseas company – well if you set it up pre-credit crunch when it was the normal business practice in investments and asset management – then you have to switch to UK tax residence – as mine has been from day one anyway.
Fourth, avoid jurisdictions which whilst in the legal and financial world have always been acceptable, have suddenly become unacceptable (eg BVI, Cayman, Jersey, Isle of Man). This will avoid you falling foul of false innuendo. This is going to be difficult if you are in financial services.
Fifth always keep the relevant Government bodies informed, eg UKTI, FSA (as I have always done).
Sixth gain no tax advantage from tax mitigation, efficiency, reduction unless like a SIPP, or ISA, Pension it is specifically mandated by the Government (I never have had tax advantage from overseas company shareholdings).
Seventh be UK tax resident, receiving all income in the UK, and none off-shore, or if it is necessarily offshore, volunteer to pay tax in the UK even if you don’t have to.
Finally, never complain, you are lucky that your education and talent has got you a profile worth attacking. But remember, because you represent your community, you must always not only do the right thing, but be seen to do the right thing, even at personal expense.
In summary, you have done nothing morally wrong if you have gained no tax benefit from an overseas holding by always keeping it UK tax resident. Then, you are ‘whiter than white’ and remove ammunition from your adversaries.
But of course the spin is ‘Indian on overseas secret list’ – the false innuendo is very disturbing emotionally as you can imagine – and what hurts is an innuendo. Throw in the word ‘tax haven’ and it all starts sounding very sexy. But that is the new politics of taxation and it makes for good stories.