Revealed: how City minister Andrea Leadsom used controversial trusts to reduce her potential inheritance-tax bill

New Help to Buy supremo also used offshore banking for buy-to-let property business

Tom Harper@TomJHarper
Friday 18 April 2014 14:04
Conservative MP Andrea Leadsom used controversial trusts to reduce her potential tax bill
Conservative MP Andrea Leadsom used controversial trusts to reduce her potential tax bill

Andrea Leadsom, the new City minister, used controversial trusts to reduce her potential tax bill and took advantage of offshore banking arrangements for her buy-to-let property company – in an apparent contradiction to George Osborne’s attempts to crack down on tax avoidance.

The former Barclays banker, who was appointed to the Treasury by the Chancellor this month, is facing questions after it was disclosed that she had placed her shares in the property company into trusts for the benefit of her children – a move that is commonly used to avoid inheritance tax.

Bandal – the buy-to-let firm created by the former City high-flyer, 50, and her husband, another ex-banker – also created charges over two of its buy-to-let properties in favour of the offshore branch of an investment bank. The move indicates Ms Leadsom obtained loans from the Jersey-based wealth-management operation, secured against the buy-to-let properties.

The revelations are particularly embarrassing as Ms Leadsom now has overall responsibility for the Government’s controversial Help to Buy property scheme – which has faced accusations of creating another house-price boom and pushing property ownership out of the reach of lower-income families.

Ms Leadsom resigned as a director of Bandal in February just before she was promoted to the Treasury in the reshuffle, and was replaced by her 18-year-old son. His occupation is listed as “student”, according to documents at Companies House. In a sign of the apparent nervousness around the new minister’s financial arrangements, Bandal’s offshore charges, to Kleinwort Benson (Channel Islands) Ltd, were also recently amended to the UK branch of the investment bank, just before Ms Leadsom stepped up to her ministerial post in charge of the City and financial regulation.

There is no suggestion that any of Ms Leadsom’s schemes are unlawful but the City minister’s former use of offshore banks to service her personal, buy-to-let property business is uncomfortable for the minister and her boss Mr Osborne, who has criticised tax avoidance schemes and railed against the use of offshore banking arrangements.

Last week, the Chancellor spoke of a stronger clampdown on people who hide their money in tax havens to avoid paying tax.

In a speech, Mr Osborne said: “A very important part of our economic plan is that everyone makes a fair contribution. The message is very simple – if you’re hiding your money offshore, we are coming to get you.”

Shabana Mahmood, shadow Exchequer Secretary to the Treasury, said: “It would appear that Andrea Leadsom urgently needs to explain these arrangements and why they were put in place.

“The public are rightly angry when the tax system is manipulated by those with the money to do so. Ministers responsible for this state of affairs must themselves be above board and seen to be above board, so it would seem there are serious questions to answer here.”

Lord Oakeshott, a former Liberal Democrat Treasury spokesman, said: “Ms Leadsom is sailing pretty close to the wind. I am surprised she had loans from banks in the Channel Islands while she was an MP and I can see why she would have wanted to clean all that up before becoming a Treasury minister.”

In 2003, Ms Leadsom and her husband Benjamin set up Badal Ltd to invest in more than £1m-worth of properties in Oxford and Surrey. In 2005, the couple transferred 24 per cent of the shares to two trusts called the “Children’s Settlement”, in a move that was first reported by Private Eye.

One year later, in a bid to clamp down on tax avoidance, the-then Chancellor Gordon Brown moved to reform similar schemes, ruling that “transfers to nearly all new trusts and additions of assets to existing trusts will be subject to inheritance tax”.

Charges over two of Ms Leadsom’s buy-to-let properties in Oxford were created offshore in 2004 and 2006 in favour of Kleinwort Benson (Channel Islands) Ltd, based in Jersey. These were moved back within the UK last October to Kleinwort Benson Bank Ltd, apparently as Ms Leadsom’s Westminster star began to rise.

Before entering Parliament in 2010, she spent 25 years in the banking sector. Since becoming an MP, Ms Leadsom has campaigned vigorously against bankers’ bonus caps and a financial transaction “Tobin” tax.

It is not the first time millionaire Tory ministers have been caught up in tax avoidance claims.

The Defence Secretary Philip Hammond, former Chief Whip Andrew Mitchell and Mr Osborne were all accused of legal tax avoidance in 2010 by Channel 4’s Dispatches programme. All three men denied any wrongdoing.

A spokesperson for Ms Leadsom said: “This is a normal corporate situation and all tax that is due is being paid. None of the loans for the properties are based offshore.”

Tax affairs: What she did

2003 Sets up buy-to-let property company with husband, invests £1m in houses in Oxford and Surrey.

2004 Charges over the property created in favour of Kleinwort Benson (Channel Islands) Ltd, based in Jersey, a tax haven.

2005 Transfers 24 per cent of the shares in property company to two trusts set up for the benefit of her children.

2006 Another charge over a buy-to-let property created in favour of Kleinwort Benson (Channel Islands) Ltd.

2010 Becomes a Tory MP.

2013 Moves the offshore charges back to the UK branch of Kleinwort Benson.

2014 Steps down as director of buy-to-let property company, becomes City minister in cabinet reshuffle.

Tom Harper

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