They are Scotland’s hidden tax havens - and one may well be located on a street near you.
The Sunday Herald can today reveal the PO Boxes across the country used as “virtual HQs” for thousands of limited partnerships - the secretive Scottish shell companies advertised as “offshore” tax shelters and increasingly linked with international allegations of money-laundering, corruption and organised crime.
Using data from the UK’s corporate register, Companies House, we have counted 25,000 Scottish limited partnerships or SLPs as of last autumn with the number of new registrations increasing by 40%, year-on-year, since 2008.
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There were an average of just 498 new SLPs registered a month in the year to April 2016, more than in the whole year of 2007-08. More than half of all the SLPs, some 14,000 are registered at just 15 addresses, from side streets in Ayr and St Andrews, or a former council flat in Rosyth to prestige postcodes in Edinburgh’s West End and Glasgow city centre.
These include nearly 3000 at a flat in Leith and nearly as many again at a former draper’s shop in the former mining village of Douglas, South Lanarkshire.
None of the 25,000, according to the official extract data of Companies House, has filed accounts.
Scottish limited partnerships or SLPs are businesses that often start of their lives advertised online in eastern Europe as “Scottish offshore companies”, firms registered in Scotland but with parent companies in the world’s shadiest fiscal paradises such as Belize or Panama.
But they end up being used as what Liam McArthur, justice spokesman of the Scottish Liberal Democrats called “murky vehicles”.
McArthur added: “Red flags have been raised repeatedly over the role of SLPs in transferring money out of eastern Europe.”
Previously SLPs have been allegedly implicated in a major Latvian corruption scandal involving the now jailed nephew of the president of Uzbekistan and, as detailed in this newspaper, the looting of $1bn from banks in Moldova. However, SLPs are also often used legitimately.
The Scottish Greens, Liberal Democrats, Labour and SNP have all questioned the need for SLPs in their current guise. Andy Wightman, the Green MSP for Lothians and a land and corporate reform campaigner said they are tarnishing Scotland’s reputation.
Oxfam, the international charity called for them to be reformed, saying Scotland was in danger of becoming one of the world’s “secret tax havens where the privileged minority hide billions from authorities”.
Only Westminster can amend the law that is currently being exploited.
Parent companies in tax havens increasingly favour SLPs, which have ‘legal personality’ and, when sold with the right Companies House certificate of good standing, enable their ultimate beneficial controllers to open bank accounts and buy and sell assets.
The strength of SLPs, say sources familiar with the industry, is that they have the both air of respectability of a British company and the no-questions-asked secrecy of the most dubious Caribbean tax haven.
READ MORE: Richard Smith on how SLPs could be reformed
As long as SLPs have offshore parent companies in tax havens and do no business in the UK, they have no need to pay the Inland Revenue anything or file any financial accounts. This, say critics, is a recipe for criminality.
The Sunday Herald has identified 15 single addresses with huge numbers of SLPS registered. The biggest location, on paper at least, is that of 78 Montgomery Street, Edinburgh, the base of the recently dissolved company creation firm Cosun Formations.
This address was named in the Sunday Herald’s investigation in the Moldovan bank scandal. Five of the firms allegedly used to launder $1bn out of the former Soviet republic were registered there. Four of those companies - which were named by accountants Kroll in a probe carried out on behalf of the Moldovan parliament - have now been dissolved.
The flat was previously the official home to as many as 3500 different entities, some 3000 of them SLPs. That number has fallen under 3000 as of September last year, according to data from Companies House.
The Leith flat has been raided by the police and HMRC, and its owners - who say they only acted as mailbox agents - have quit the business. Another unlikely site for such hives of SLPs is a council home in Rosyth which, the Companies House data shows, still has nearly 500 SLPs registered as of last September.
The house in Rosyth, Fife
The next biggest “factory” for SLPs is 44 Main Street, Douglas. This is the home of a small office services business, Office Wizards.
Lily Clark, a partner in the firm, says she is only providing a mailbox service for a modest fee and was alarmed by the nature of some of the firms using her address. “The government should change the law,” she said. “All we do is post on the mail.”
The former draper's shop in Douglas, Lanarkshire
Firms based at the Douglas address include Fuerteventura Inter. Earlier this month it was named by Ukraine’s National Anti-Corruption Bureau in their investigation of officials accused of skimming from the state sale of cannon shells to the United Arab Emirates. Another Douglas company is Clever Networks, which fronts three websites described by critics as “essay mills”, businesses offering to write academic work for students for cash.
Firms based in Douglas are currently for sale on the open market. Intelligent Solution Group Ltd, which gives an address in Belize but has offices in Riga, Moscow, Kiev and Hong Kong, is this week selling two firms registered in April in Douglas. One is called Antwerpen Union, owned by two partners from an unspecified jurisdiction. The second SLP for sale is London Fortress. It has the same founding partners as Fuerteventura Inter. The Sunday Herald believes these partners may be entities registered in Belize.
Scottish and other offshore shell companies for sale this week by Intelligent Solution Group
SLPs are also being sold openly with addresses at one of the biggest virtual offices in Glasgow, Blue Square Offices at 272 Bath Street. As of September, this ordinary building had more than 1400 LPs.
A firm in Ukraine, Ukrbizneskonsalt, is currently marketing 10 SLPs at under $1000 at the address. These include, as a random example, a firm called Balmy Holdings. Ukrbizneskonsalt praises SLPs as “offshore companies” because Scotland is not blacklisted in Ukraine, Russia, or the rest of the former Soviet Union as a tax haven. It adds: “SLPs are quick, reliable and prestigious. Scotland provides the opportunity to make use of all the advantages of a European company. It is recommended too that it should be used in conjunction with classic offshore firm in Belize or the Seychelles.”
Kiev agency Ukrbizkonsalt offers "prestigious English and Scottish companies for bank accounts in the EU".
Off-the-peg Scottish Limited Partnerships on sale for under $1000 complete with power-of-attorney documents
One of the biggest hosts of SLPs is Mail Boxes Etc, a network of franchises providing PO boxes. As of September last year it had around 300 at its shop in Bell Street, St Andrews, Fife; some 500 in Fullarton Road, Ayr; nearly 700 at West George Street, Glasgow; nearly 900 at South Bridge, Edinburgh.
Simon Cowie, chairman of Mail Boxes Etc, stressed he had not heard of SLPs until alerted to their existence by the Sunday Herald. Cowie said bona fide PO box and virtual office providers worked closely with the police, HMRC, Companies House and other authorities to monitor any abuses of their services.
Cowie said: “We follow procedures - established by the Virtual Office Forum and meeting the requirements of Money Laundering Regulations - to ensure that owners and directors of companies using our services are identified and details are recorded.
“This information is made available to authorities when required for the investigation of crime. When any criminal activity by a customer becomes knows to us, we proactively alert authorities. We value and protect our good name for ethical business standards.”
Other ‘factories’ include more than 1100 at a virtual office Mitchell Street in Edinburgh. Firms associated with that address includes a dissolved SLP, Childwall Systems, that was recruiting soldiers in the war zone of Donetsk, Ukraine, this month.
Donetsk, currently occupied by pro-Russian separatists
There are also council houses in Inverness, Dundee and Edinburgh where hundreds of firms are registered. There is no suggestion that the firms which create SLPs or host them have any knowledge of any criminal or unethical activity.