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Panama Papers: colleges deny offshore activities

Unscrupulous companies may be trading off FE names listed in leaked documents

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Unscrupulous companies may be trading off FE names listed in leaked documents

Colleges have denied using offshore investments to avoid paying tax, despite their names being used by companies exposed in the Panama Papers, TES can reveal.

Tax experts have warned that colleges could be vulnerable to unscrupulous companies trading off their names, after titles that were apparently related to four UK FE institutions appeared in the tranche of files. The companies were registered in tax havens the British Virgin Islands and the Seychelles.

In April, the International Consortium of Investigative Journalists released details of about 200,000 registered companies and 11.5 million files found in the database of law firm Mossack Fonseca. Among them were entities that appeared to be connected to South Lanarkshire College, Preston’s College, Chesterfield College and Sussex Coast College Hastings.

‘No knowledge’

Richard Murphy, director of Tax Research UK, told TES it was “entirely plausible” that the companies could have been set up by individuals who wanted to pass themselves off as the colleges. South Lanarkshire College Ltd and Hastings College Ltd are currently registered at the same PO Box address in the British Virgin Islands. Preston College Ltd is listed in the same country as being inactive. Chesterfield College Ltd, also inactive, is listed in the Seychelles.

One of the documents reveals that a company called Delter Business Institute Ltd has been a shareholder in South Lanarkshire College Ltd since 2008.

According to South Lanarkshire College’s head of finance, Keith McAllister, the institution last dealt with Delter in 2011 when it acted as “educational agents for Chinese students who wished to come to the UK to study”. Mr McAllister denied knowledge of any offshore company and said that the college “has no offshore interests whatsoever”.

Meanwhile, a spokesperson for Chesterfield College said that the entity bearing its name was “a case of mistaken identity”. They added: “We have never been a limited company and never been known as Chesterfield College Ltd.” Officials at Preston’s College and Sussex Coast College Hastings also denied any knowledge of the companies set up in their names. A spokesperson for Preston’s College said: “Having checked college archives and liaised with former members of staff, who worked within the financial department between 2003 and 2005, we can confirm that Preston College Ltd was not set up by, nor has any connection to, Preston’s College.”

A spokesperson for Sussex Coast College said: “All I can say is, this is not Sussex Coast College Hastings, nor is it Hastings College of Art and Technology, our previous name.”

The Association of Colleges said that colleges were vulnerable to people trading off their names, and that it had been lobbying the government for stronger legal protection of institutions’ identities.

Financial advantage

Independent tax experts told TES that the offshore companies in the colleges’ names might have been created to solicit business and secure a financial advantage.

Professor Murphy from Tax Research UK, who is also an expert in practice in international political economy at City University London, said that the secrecy of offshore tax havens allowed individuals to pass themselves off as representing organisations that they had no connection to.

“It is entirely plausible that an offshore entity might want to represent that it had links to a UK education establishment to secure a financial advantage of which that college was wholly unaware,” he added. “This is one of the reasons why tax and economic justice campaigners are so sure that we need full offshore transparency. The risk of fraud, error or just misunderstanding is very high. These colleges may have suffered as a result. I hope no students, real or potential, did.”

Alex Cobham, director of research at the Tax Justice Network, said: “If we discount the possibility that the names were chosen at random, the scenario that would give cause for concern is that the names might have been used to solicit business – for example, teaching provision – as if it were being delivered by the colleges.”


Stairway to havens

What are offshore tax havens? Tax havens are jurisdictions in which certain taxes are low or non-existent. They are used legally by businesses to avoid currency-exchange charges during international trade – but they can also be used by covert corporate identities to harbour or misappropriate funds.

What information was in the Panama Papers? The data includes basic details about companies, trusts and foundations set up in 21 jurisdictions, including Bermuda, the Cayman Islands, Hong Kong and Jersey. It was obtained from Panamanian law firm Mossack Fonseca, which claimed that it had been hacked.

What will happen next? HM Revenue and Customs has said that it will examine the data and take action against organisations that it finds have evaded tax.

This is an article from the 3 June edition of TES. This week's TES magazine is available in all good newsagents. To download the digital edition, Android users can click here and iOS users can click here

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