Dukes of Westminster pumped millions into secretive offshore firms
tony at cultureshop.org.uk
Fri Nov 24 00:28:33 GMT 2017
Dukes of Westminster pumped millions into secretive offshore firms
Paradise Papers bring to light key parts of
structure used to manage £9.5bn fortune inherited
last year by Hugh Grosvenor, 26
Grosvenor became Britains youngest billionaire
following his fathers death in 2016. Photograph: PA/Guardian Design Team
Tuesday 7 November 2017 13.00 GMTLast modified on
Friday 10 November 2017 06.39 GMT
Duke of Westminsters four main rural estates:
Forest estate Sutherland and
Garganta in neo-fascist Spain.
The international property empire of the dukes of
Westminster pumped dividends worth millions of
pounds into secretive companies in Bermuda and
Hugh Grosvenor became Britains youngest
billionaire after his fathers death last year.
Thanks to careful planning by his predecessors,
the 26-year-old inherited the sprawling Grosvenor
Group without having to pay the 40% death duties
imposed on most British taxpayers.
leak of 13.4m files, including documents from the
archives of the offshore law firm Appleby,
combined with public information from the UK
companies register, has brought to light key
parts of the structure used to manage the seventh
dukes fortune - estimated at £9.5bn in the Sunday Times rich list.
What are the Paradise Papers?
The Paradise Papers is a special investigation by
the Guardian and 95 media partners worldwide into
a leak of 13.4m files from two offshore service
providers and 19 tax havens' company registries.
The files reveal the offshore financial affairs
of some of the worlds biggest multinational
companies and richest individuals, and set out
the myriad ways in which tax can be avoided using artificial structures
They reveal for the first time the names,
settlors and creation dates of the five UK trusts
that have been used, for generations, to keep in
the hands of a single family an estate that
includes much of Belgravia and Mayfair in London,
165,000 acres of British countryside, hundreds of
developments in North America, Australia and Hong
Kong, and an island in Vancouver.
The trusts established by successive dukes to
control Grosvenor are UK resident and subject to
British tax they pay a 6% charge on the value
of many of their assets every 10 years. Assets
worth £600m belonging
to the 6th Duke, which were not held in trust,
were inherited by his wife exempt from tax, as is
normal for married couples. Death duties will be
payable in the UK when her children inherit.
But the papers show that not all the familys
wealth was managed onshore. Until 1999, about
half of the shares in a subsidiary that ran
Grosvenors North American and Australian
operations were controlled by tax haven companies.
Managed from Canada, the international wing of
Grosvenor was created in 1953 when the estate
made its first big expansion outside Britain by
acquiring the 485-hectare Annacis Island in the
middle of the Fraser river in Vancouver.
By the turn of the century, Grosvenor
International Holdings Ltd (GIHL) had assets
worth more than C$1bn (£600m), with 42% of its
shares held by screen companies in
Vesta Ltd, incorporated in Bermuda in 1964,
controlled Trumpet Company Ltd, another Bermuda
company, which in turn held shares in GIHL.
Alongside it was a parallel
structure: Nakar Holding SA, incorporated in
1977, owned shares in Compact International Inc,
which in turn held part of GIHL.
The identities of the owners of these four
companies have never been publicly disclosed by
Grosvenor. However, Applebys internal database
listed Vesta and Trumpet as belonging to the Grosvenor Family Trust.
Grosvenors annual reports show millions in
payments collected in Panama and Bermuda: a
combined £1m in 1999, direct from GIHL, and a
similar sum the year before. Eventually, the
offshore companies swapped their shares in GIHL
for a 6.5% holding in the overall Grosvenor
Group, collecting £3.7m over a seven-year period.
In March 2007, Grosvenor announced it was buying
out Vesta and Nakar for £40m. The reason given
was to better align the shareholders interests
with the groups activities. The companies were dissolved later that year.
A spokesman for the Grosvenor estate said: Two
small overseas trusts were established over 50
years ago, when it was accepted common practice
to facilitate the acquisitions of some non-UK
assets. No family member has received any benefit
derived from these but, as UK residents, if they
ever did then they would be fully liable to tax in this country.
Our policy is to uphold the highest standards of
business practice. We are careful to ensure that
our ownership of overseas property is through
vehicles incorporated in the same country as the
asset. Where the group occasionally has entities
in offshore locations, it is typically as a
result of the requirements of joint-venture partners.
The papers reveal a number of other offshore
entities, some of which held investments in Asia.
By 2009, the sixth dukes trustees appear to have
become wary of transacting too much of his business via tax havens.
That year, a member of the Appleby marketing team
visited Jeremy Moore, the head of tax at
Grosvenor Group, and another colleague. He took a
few notes on their conversation. Grosvenor liked
working with the firm but was wary of giving it
too much to do. Applebys officer noted: They do
not have too many offshore holdings as they have
to be very careful reputationally, as the
property group is owned by trusts for the Duke of Westminsters family.
Documents from 2012 show Grosvenors shares were
held by five trusts and by the sixth Duke of
Westminster in his name. The oldest trust, simply
referred to as ADWSLF in the data, was settled,
or created, in 1953 by the second duke upon his
death. The familys enthusiasm for trusts may be
explained by the fact that death duties of £17m
swallowed much of the second dukes £25m fortune.
The next oldest was the Fourth Duke of
Westminsters Settlement, which dates from 1964, three years before his death.
There is a Fifth Duke of Westminsters
Settlement, created in 1965, and the sixth duke,
who died last year, created two more. The first
was settled in 1971, the second in 1974. His
will, published recently, suggests he created yet more trusts before his death.
The tax advantages of UK trusts such as these
have been gradually whittled away. Since 1984,
they have been subject to a 10-yearly tax charge,
although there are exemptions for agricultural land and trading businesses.
Nimesh Shah, a partner at the accountants Blick
Rothenberg, said: Nowadays, trusts are used for
a variety of reasons and tax is only one of those
reasons. These trusts are about trying to keep
control of the assets within the family unit.
There is no public register listing the names,
beneficiaries or holdings of any UK trusts,
despite the fact such vehicles control vast
tracts of land and property in Britain. HMRC has
a register of trusts that pay tax, but this is
not available to the public. In Europe, MEPs have
been pushing for each member state to improve
transparency by introducing public registers of
trusts. The papers reveal how reluctant Grosvenor
employees were to share trust details.
On one occasion, when tasked with setting up a
Bermuda company in 1999, Grosvenor
representatives asked Appleby to seek
dispensation from the normal rules for declaring
who the trust beneficiaries were.
The information was required by the Bermuda
Monetary Authority (BMA) before the company could
be incorporated. Because the Bermuda company was
to be controlled by trusts, Appleby would need to
follow standard procedure and disclose the names
of their beneficiaries and other basic information to the regulator.
Grosvenor did not want to share this data. In a
fax dated 9 November, Appleby promised to revert
to the BMA to determine what they will give in
on, saying it had already obtained from the BMA
that they have indicated they will not require a
personal declaration from the duke.
The Bermuda entity, eventually called Grosvenor
Land Property Fund Ltd, would go on to invest
$30m in developing luxury homes in some of Hong
Kongs most desirable neighbourhoods, in a joint
venture with another wealthy family, the
Keswicks, through their Jardine Matheson Group.
The man from Appleby warned that it raises
alarm bells when persons decline to disclose
such information fully and disclosure of
ownership was a longstanding policy designed to
preserve Bermudas relatively clean image in the offshore world.
He then proposed an unusual arrangement: Would
it make a difference if the information requested
was placed in a sealed envelope and marked for
the eyes of the CEO of the BMA only so that such
information does not pass through the hands of
intermediaries such as ourselves?
The Grosvenor spokesman said, after checking the
records, no evidence had been found to suggest
that the trustees asked for any such dispensation
from the Bermuda Monetary Authority in 1999. He
said investors in the property fund would have
paid tax in their own countries and the use of
jurisdictions such as Bermuda was common for
these types of funds, in order to avoid investors being taxed twice.
The information supplied, whatever it was,
appears to have satisfied the Bermuda
authorities, because the company was successfully incorporated on 16 December.
The seven dukes
First duke: 1825-1899. Hugh Lupus Grosvenor was
MP for Chester and died the richest man in Britain.
Second duke: 1879-1953. Hugh Richard Arthur
Grosvenor, grandson of the first duke, was known
to family and friends as Bendor and was a lover of Coco Chanel. He left no son.
Third duke: 1894-1963. William Grosvenor was
brain damaged at birth, and died unmarried and childless.
Fourth duke: 1907-1967. Gerald Hugh Grosvenor,
cousin of the second duke, left no son.
Fifth duke: 1910-1979. Robert George Grosvenor,
brother of the fourth Duke, lived in Northern
Ireland at Ely Lodge on an island in the middle of Lough Erne.
Sixth duke: 1951 to 9 August 2016. Gerald
Cavendish Grosvenor, son of the fifth duke,
mentor to Prince William, served in the Territorial Army for 40 years.
Seventh duke: born 1991. Hugh Richard Louis
Grosvenor is Britains youngest billionaire.
From South America, where payment must be made
with subtlety, the Bormann organization has made
a substantial contribution. It has drawn many of
the brightest Jewish businessmen into a
participatory role in the development of many of
its corporations, and many of these Jews share
their prosperity most generously with Israel. If
their proposals are sound, they are even provided
with a specially dispensed venture capital fund.
I spoke with one Jewish businessmen in Hartford,
Connecticut. He had arrived there quite unknown
several years before our conversation, but with
Bormann money as his leverage. Today he is more
than a millionaire, a quiet leader in the
community with a certain share of his profits
earmarked as always for his venture capital
benefactors. This has taken place in many other
instances across America and demonstrates how
Bormanns people operate in the contemporary
commercial world, in contrast to the fanciful
nonsense with which Nazis are described in so much literature.
So much emphasis is placed on select Jewish
participation in Bormann companies that when
Adolf Eichmann was seized and taken to Tel Aviv
to stand trial, it produced a shock wave in the
Jewish and German communities of Buenos Aires.
Jewish leaders informed the Israeli authorities
in no uncertain terms that this must never happen
again because a repetition would permanently
rupture relations with the Germans of Latin
America, as well as with the Bormann
organization, and cut off the flow of Jewish
money to Israel. It never happened again, and the
pursuit of Bormann quieted down at the request of
these Jewish leaders. He is residing in an
Argentinian safe haven, protected by the most
efficient German infrastructure in history as
well as by all those whose prosperity depends on his well-being.
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