IOM Covid removing restrictions

[Gladys]

3 minutes ago, offshoremanxman said:

I know how it works it’s classic offshoring. If you read the link to the Irish Times I put in my original response it says: the company was restructured in March 2020, which resulted in its ownership being vested in an offshore entity on the Isle of Man. Mr Fitzgerald remains its ultimate controlling party.

https://www.irishtimes.com/business/health-pharma/randox-diagnostics-records-big-sales-surge-on-covid-19-testing-1.4580256

The press is reporting rumours that this is going to be investigated as part of the Owen Paterson inquiry (he was their lobbyist in Parliament) as it looks like right around the time they secured a £133M contract with UK government thanks to his help they shifted the holding entity to the IOM to capture the excess profits that they were going to make flogging covid tests in the UK tax-free. 

I did read the link which says the ownership has been vested in an IOM entity  presumably a holding company (could be a trust, or foundation) but yer man remains the ultimate controlling party.  The operations remain where they are. 

[Gladys]

2 hours ago, offshoremanxman said:

I never said they didn’t. The rumoured investigation is around the legitimacy of shifting the tax base so that they saved tax on windfall trading. 

Or the Paterson affair? 

[Lost Login]

2 hours ago, offshoremanxman said:

I know how it works it’s classic offshoring. If you read the link to the Irish Times I put in my original response it says: the company was restructured in March 2020, which resulted in its ownership being vested in an offshore entity on the Isle of Man. Mr Fitzgerald remains its ultimate controlling party.

https://www.irishtimes.com/business/health-pharma/randox-diagnostics-records-big-sales-surge-on-covid-19-testing-1.4580256

The press is reporting rumours that this is going to be investigated as part of the Owen Paterson inquiry (he was their lobbyist in Parliament) as it looks like right around the time they secured a £133M contract with UK government thanks to his help they shifted the holding entity to the IOM to capture the excess profits that they were going to make flogging covid tests in the UK tax-free. 

I have no idea of any link or enquiry re Patterson, Randox or the UK contract however you are probably wrong re capturing "excess profits" "tax free" as from the report it states that Mr Fitzgerald remains the "ultimate controlling party" and from a quick check of the directors the company it appears not to be managed and controlled from the IoM. Tax is not always the primary motive for restructuring and I expect that in may be the case in this instance and with the IoM company also being tax resident in the UK and paying UK taxes just as a UK incorporated company would.

This is not an unusual structure and I expect there high hundreds, if not many more, of IoM companies that act as holding companies that are tax resident in the UK, Ireland etc and pay tax as normal in those countries whilst not being tax resident in the IoM. 

 

[Andy Onchan]

8 minutes ago, offshoremanxman said:

Whether it’s specifically tax or whether it’s moving the genomics IP offshore to license it back to the tax paying companies distributing the kits the timing right on the roll out of the pandemic has led to some interesting questions I believe as Patterson is said to have lobbied for the contract.

What are the interesting questions?

[Gladys]

2 minutes ago, offshoremanxman said:

Well exactly ones like this. 

Which is factually wrong.  Also as both LL and I have said, it doesn't seem to work from a tax viewpoint. 

[Banker]

Austria considering an actual lockdown for unvaccinated, just banning them from restaurants etc at present!

https://www.euractiv.com/section/politics/short_news/austria-introduces-tough-restrictions-for-unvaccinated/

[Andy Onchan]

29 minutes ago, offshoremanxman said:

I’m just commentating on what is being reported elsewhere online I clearly haven’t made any of it up. As I said above they could well have moved the IP here for the genomics suite and now be expensively licensing it back to the UK tax paying companies distributing the kits from the IOM company. The effect of that sort of thing (paying a chunky royalty back to an IOM company) would be rather the same as paying little or no tax. It’s clear the timing (at the time of the pandemic and around the time the UKG contract was secured) is potentially suspect and is raising questions in the midst of the Paterson affair. That is all I am commenting on.

I'm told intangibles transactions can be a nightmare with HMRC if not done right.

[Gladys]

25 minutes ago, Andy Onchan said:

I'm told intangibles transactions can be a nightmare with HMRC if not done right.

Yes they are, it was one of the thinly veiled attempts to shift profits around. If I remember correctly, holding IP is one of the activities that requires substance (ie true management and control) here.  So, if as LL has said the directors are in the UK, it doesn't seem to achieve that.  As he also says, tax mitigation is one reason, but not the only reason for having an IOM holding structure.  Perhaps it is the first step in a bigger plan, possibly to open a family office. 

Mr Ethical is wrong as according to the press report  they have not relocated here just established the holding company here, for whatever reason. 

However, getting back to the original point,  as it currently stands it does nothing for our biomed sector. 

[Gladys]

The timing is odd, but we don't know why.  

Here is a link to an explanation of the substance requirements. 

https://www.pwc.com/im/en/services/tax/substance-requirements-isle-of-man.html

It doesn't look like they meet the substance requirements if LL's info is correct. 

But is not the example of growing the biomed sector which you first thought it was. 

Perhaps the CSP servicing the company has the full background and is satisfied.  Or perhaps not. 

[Gladys]

11 hours ago, offshoremanxman said:

Well it sort of did. Randox the main manufacturer of covid lateral flow and PCR tests with one of the main LFT and PCR contracts (worth £133 million) with the UK government re-domiciled its corporate structure to the IOM from N Ireland in March 2020 just as covid hit.

https://www.irishtimes.com/business/health-pharma/randox-diagnostics-records-big-sales-surge-on-covid-19-testing-1.4580256

Just think of all the tax it might have paid on the excess profits it’s made in the last 18 months selling tens of millions of covid-19 kits if it hadn’t done that? So perhaps we have most certainly helped grow the biotech sector. 

As we have been saying, it doesn't appear to work for tax purposes and, worse, could be subject to penalties if it does not comply with the substance rules. 

Yes, it looks odd, but the real oddity is trying to understand what it will actually achieve. 

We don't know the purpose or the advice on the set up. Perhaps yer man is going to relocate here, who knows?  Without having that info it is hard to say whether it is for legitimate purposes or not. 

[Gladys]

7 minutes ago, offshoremanxman said:

As I have said several times I’m only responding to things I have read online as I thought they were of interest in relation to the IOM. I clearly haven’t made this story up, and some people in UK political circles are clearly reasonably speculating that some tax benefit might have been derived from moving the corporate top company to the IOM and the timing is most certainly suspect given they got contracts totaling nearly £650M after the IOM structuring was done. That’s all I have said. It’s never exactly clear how these things bolt together to anyone on the outside. Naturally there will be speculation in political circles given the timing of the move and the known Owen Paterson link. 

Yes, but we have repeatedly told you it doesn't work.  

[Andy Onchan]

9 minutes ago, offshoremanxman said:

In your opinion on the basis of seeing zero information about anything to do with the transaction or the structure - it’s a NMV as well so you’re not going to see most of the relevant information at the registry either. I assume you understand what reasonable speculation is? It’s not unreasonable for persons in political circles in the UK to speculate that there may well be a tax angle to a re-structure that occurred right before a company got paid £650M by UK Treasury.

How much profit did the operating company make before any distribution? 

[Lost Login]

2 hours ago, offshoremanxman said:

In your opinion on the basis of seeing zero information about anything to do with the transaction or the structure - it’s a NMV as well so you’re not going to see most of the relevant information at the registry either. I assume you understand what reasonable speculation is? It’s not unreasonable for persons in political circles in the UK to speculate that there may well be a tax angle to a re-structure that occurred right before a company got paid £650M by UK Treasury.

Fair enough to speculate if you are a lay person with little knowledge but presumably those in political circles could speak to advisors to see if there was a tax angle. I have seen a couple of apparently similar structures and none were related to tax. I therefore believe that is unlikely the restructuring was related to tax especially as the residency of the directors suggests that the Isle of Man companies are tax resident in the UK. 

There is a fair bit of published information about that might give an indication of what was or was not behind the transaction. This includes the  consolidated accounts for Randox Holdings which in note 12 shows no sale or transfer of IP so that would appear to rule that out. That would indicate that it was nothing to do with transfer of IP as a poster suggested

Note 13 though shows a substantial disposal of land & properties apparently held by Subsidiaries. This is roughly matched by reductions in bank overdrafts and loans detailed in notes 17 & 18.

Note 23 details which companies were transferred from the Holdings to the IoM companies and these appear to be mainly property or land owning companies.

Note 28 sets out which company prepares consolidated accounts. 

As the companies that appear to have moved were property/land owning companies this suggests to me the re-organisation was a means of separating them from the operating group and doing so using an IoM holding company would mean there is no requirement to publish consolidated accounts including those companies. 

The IoM companies appear not to be listed as foreign companies at the UK companies registry which would suggest they are not considered to have a permanent place of establishment in the UK although they are probably UK tax resident. This would provide a level of privacy. I appreciate Randox appear to be based north of the border but there used to be a substantial market in large private Republic of Ireland companies being held by IoM unlimited company structures purely because it meant they did not have to file accounts publically.    

If I had to put money on it then my guess is that this was a re-organisation that had nothing to do with tax but provided a bit of privacy whilst also separating investments assets from the operating companies so that if one or other went bang the other was protected. I expect there are several hundred, if not more, similar structures operating today in the IoM for the same reason.

As for the re-organisation relating to Covid & Government contracts well one IoM Company was formed in 2018 and the other on 5 February 2020.  I think the first UK case was 29th January 2020 and the first IoM cases were 19 March 2020. Presuming that there was some complicated planning required for the restructuring then either they had a magic crystal ball or the restructuring and Covid being at roughly the same time would appear to be a co-incidence

[Gladys]

2 hours ago, offshoremanxman said:

In your opinion on the basis of seeing zero information about anything to do with the transaction or the structure - it’s a NMV as well so you’re not going to see most of the relevant information at the registry either. I assume you understand what reasonable speculation is? It’s not unreasonable for persons in political circles in the UK to speculate that there may well be a tax angle to a re-structure that occurred right before a company got paid £650M by UK Treasury.

OK, so have an investigation then find whether it confers any tax advantage, but there may be others. I am not saying there may not be another purpose, but as a tax device, it doesn't hold much promise. Perhaps it was flawed advice.

BTW, NMV is not used much now as that type of company has been around for 16 years.

[Gladys]

Just read LL's post that explains possible motivations.  Thank you.

Still not sure how the substance rules are dealt with though.