Jeb Bush, a front-runner to become the Republican Party’s next presidential nominee, has used Britain to set up a private equity fund that could possibly allow it to avoid paying tax in America.
The potentially damaging revelation was uncovered by the financial news wire Bloomberg and could pose a serious problem for the former Florida governor’s nascent campaign.
The Obama campaign ruthlessly exploited Mitt Romney’s private equity background and income from offshore accounts.
It also shines a spotlight on London as a lucrative destination for American investors attempting to minimise their taxes following George Osborne’s decision to cut UK corporation tax to just 21 per cent – compared to the US rate of 39 per cent.
Documents filed in the US list Mr Bush, son and brother of two former US Presidents, as chairman and manager of a new offshore fund called BH Global Aviation, which raised $61m (£39m) in investment capital in September.
The fund incorporated in the UK with a structure in November, several independent finance lawyers told Bloomberg, that operates like a tax haven by allowing overseas investors to avoid US taxes and regulations.
Unlike the US, Britain does not charge corporation tax on income earned outside the UK. So if BH Global Aviation’s profits were made on investments overseas then they would effectively pay no tax. In addition, any income that was deemed earned in the UK would only be taxed at 21 per cent.
Since the UK eliminated its tax on income earned outside the country, it’s become increasingly popular for so-called corporate inversions. This is a controversial practice in which a foreign company buys a UK company, primarily to lower its tax bill.
Tax inversion was one of the reasons the American drug firm Pfizer attempted a £70bn take-over AstraZeneca. It intended to base its worldwide headquarters for tax purposes in London.
“In many deals, the UK effectively serves the same function as the Cayman Islands or Bermuda,” said Andrew Needham, a tax partner at law firm Cravath, Swaine & Moore.
“It’s like a tax haven, except it’s the UK.”
Any attempt to repatriate the profits of BH Global Aviation to the US would be subject to American tax. But the fillings reveal that 98 per cent of BH Global Aviation’s funding, or $60,883,500, comes from an entity called “Oak Tree Investment LLC”.
Mr Bush’s spokeswoman, Kristy Campbell told Bloomberg he wouldn’t identify his foreign investors, a step he would presumably have to take if he enters the race.
“If Governor Bush were to become a candidate, he would certainly review all of his business engagements,” she said. “There is nothing related to Governor Bush’s business interests that would hinder a run for president in any way should that be his decision.”Reuse content