You may have seen recent coverage in The Herald claiming Scotland has become a destination of choice for those seeking to launder cash and keep their deals secret. Is there a real problem and, if so, what can be done? As important, is there the political will to act if there is abuse, as appears to be the case?

Scottish Limited Partnerships (SLPs) are integral to the structures being put in place, but they are only part of the complex webs which have been, and I would guess, still are being, created. SLPs have been in existence for more than 100 years, and are governed by the Partnership Act 1890 and the Limited Partnership Act 1907. There is a fundamental difference between a Limited Partnership (LP) established under English law, and a SLP. The Scottish version have their own distinct legal “personality” which allow them to hold assets, borrow money and enter into contracts, for example.

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SLPs are used in many investment structures and are a well-established alternative to other forms of partnerships or companies. They have to file certain details with Companies House when they are formed, and may also be required to file annual returns and accounts – but this depends on whether they are doing business in the UK and also the tax and legal status of the partners. It should be no surprise those seeking to keep their activities secret make sure their SLPs do not have to file any such details.

In the cases highlighted in The Herald so far, the partners in the SLPs are often companies based overseas in countries such as the Seychelles or British Virgin Islands that don’t require their owners to be divulged. It can be very complex, but essentially the true owners of the companies and the SLPs can remain hidden.

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Following the G8 Summit in Northern Ireland in 2013, the UK Government introduced legislation to create a Register of People with Significant Control. This took effect from April 6 this year and requires companies and Limited Liability Partnerships to place on the public record details of individuals who have significant control over them. There are various tests to apply but the aim is to strip away layers of complexity and secrecy to identify their ultimate ownership.

But the new legislation does not apply to Limited Partnerships, including SLPs. This seems to me a bizarre decision. I have no doubt it would be difficult for many SLPs to disclose details of the partners involved, but this shouldn’t be an excuse for inaction. The UK Government has placed great store on ownership transparency but it seems we have structures on our own doorstep that are being used to enhance ownership secrecy.

Beyond this, let’s get some things straight. All Partnerships, including SLPs, are treated as “transparent” for tax purposes. This means the SLP itself is not taxable as an entity; instead, profits and gains are allocated to the individual partners and they are taxed – or not – according to their status and their share of the profits.

If the partners are UK-based individuals or companies, for example, UK tax will be payable. If, however, the partners are individuals or organisations based overseas the profits will be taxed – or not – according to the regime operating in their "home" country. It appears the partners in at least one of the cases recently highlighted in The Herald were organisations known as International Business Corporations (IBCs), resident in the Seychelles. These organisations are legislated for in the Seychelles and carry no tax for the corporation or its shareholders, and no record filing is required here in the UK.

SLPs are undoubtedly being marketed overseas as legal entities that deliver 0 per cent tax. Other entities can deliver the same result, but the lack of transparency afforded by SLPs, and Limited Partnerships in the UK, make them attractive to those who wish to remain hidden. Scotland, and in fact the UK as a whole, is seen as a trusted, legally robust and stable environment: a good choice to add some respectability. It looks likely these advantages are being exploited, and there is a real danger Scotland’s reputation is tarnished as a consequence.

So what can be done? The powers to address these issues with SLPs rest with the UK Government and the Scottish Government has raised the issue given the perceived damage to its oversight and regulatory reputation. It is important the complexity of these structures doesn’t divert attention, and the hard work put in by the press and Oxfam in highlighting these issues should be lauded. It’s now up to the UK Government to act.

Gary Deans is an independent tax expert and a member of the Oxfam Scotland Advisory Group.

You can visit Oxfam Scotland's campaign website here.