UK's Offshore Company Formation Industry Under Threat. New Supervisory Regime "Seriously Flawed"

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HMRC supervision of new Money Laundering Regulations is "potentially damaging" to UK business warns Jordans International.

The majority of UK trusts and company service providers will, as a result of the Regulations, be supervised for compliance by HMRC

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The UK's fast-growing offshore company formation and trust industry could be damaged by a supervisory regime introduced under recent anti-money laundering legislation, it was claimed today.

Jordans International Limited, which specialises in offshore incorporation and taxation advice for UK and overseas entrepreneurs and investors, has warned that a key element of the Money Laundering Regulations (the "Regulations") 2007 is seriously flawed.

Martin Palmer, Director of Jordans International, says it is "counter-intuitive" and "potentially damaging" that UK corporate and tax structures set up in the UK for offshore clients, are subject to supervision by Her Majesty's Revenue and Customs (HMRC).

And he warns that the situation could persuade professional offshore incorporation and taxation advisers based overseas to turn away from the UK and "look elsewhere" for alternative offshore domiciles for their clients.

Partly to avoid this scenario, Jordans International Limited has recently gained Practice Assurance accreditation from one of the UK's pre-eminent professional bodies, the Institute of Chartered Accountants in England and Wales (ICAEW).

"The majority of UK trusts and company service providers will, as a result of the Regulations, be supervised for compliance by HMRC," says Martin Palmer.

"It is a cause for real concern that a tax collection authority has been given the task of supervising and inspecting for Regulatory purposes businesses which set up confidential, tax-driven structures for lawful tax mitigation purposes on behalf of their clients.

"HMRC will clearly be perceived to have an obvious conflict of interest, and the fact that the regulations enable HMRC Commissioners to enter, inspect and remove files without independent authorisation must be a matter for concern".

"The employment of HMRC as the supervisor for the offshore company formation sector is potentially damaging to trust or corporate service providers, who are not regulated, as Jordans International is, by one of the professional bodies set out in Schedule 3 of the Regulations.

"Practice Assurance of Jordans International's operations in the UK by the ICAEW reflects the growing importance of our accounting and offshore taxation services, and makes the Institute a supervisor for the purposes of the Money Laundering Regulations 2007 which commands the confidence of our clients."

He adds: "However good the services of the UK trust or company services industry, if there is a widespread perception that it is substantially supervised by HMRC, this will not be in the country's interests.

"Hard-headed professional advisors in the world's leading financial centres may look for offshore corporate structures in jurisdictions where business and personal confidentiality is properly protected by the courts."


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Rachael Wheatley