Sark – Britain's Free-for-all Tax Haven
Originally published in The Freedom, Wealth & Privacy Report
by David Frost
This article was published in the 1990s, so the tax situation in Sark may have changed.
Sark,
the most recently-established of Britain's offshore tax havens, is
only nine miles from Guernsey. But unlike its tightly-regulated
neighbour it is a no-questions-asked “jurisdiction,” having more
in common with some tiny Caribbean havens than the nearby Channel
Islands company-registration centres, Jersey and Guernsey.
Secretly-owned
companies outnumber the inhabitants. More than 150 of the island's
500 residents hold directorships in thousands of companies.
“Nobody
on Sark wants interference from outside,” says the island's feudal
ruler, Michael Beaumont, “Seigneur de Sercq.” This comment is
hardly surprising from someone who still has the legal right to levy
an annual tax of one chicken per chimney and sleep with any bride on
her wedding night under the ancient “droit de seigneur.”
Another
unrepealed law originating in the time of William the Conqueror
allows husbands to beat their wives, provided they do not draw blood,
break bones or damage eyes.
Even
the Seigneur has mixed feelings about certain companies. “In some
cases one is worried about what some of the companies are up to,”
he admits. “One was set up to sell Sark numberplates and another to
sell Sark driving licences.” This is difficult to justify in a
place with just one street, and considering that cars and motorcycles
are banned from the island.
Neighbouring
Guernsey is even more worried about what might be going on behind the
veil of secrecy which surrounds Sark, and the possible harm to its
own image as one of the “respectable” tax havens. Investigations
by Guernsey police have failed to reveal who owns Sark companies or
why they have been set up.
In
a damage-limitation exercise to protect Guernsey's squeaky-clean
reputation, its police have sent a confidential report to banking
officials in the US and the UK, warning of “problems” presented
by Sark nominee directors, and non-resident “residents.”
The
report states: “Sark's unique tax position, together with the
perceived secrecy afforded by being resident on the island, led to
the phenomenon of Sark residents being sought after as directors of
companies incorporated in other countries. Many Sark directors have
no idea what their respective companies do. Few will divulge
information.”
A
company may be incorporated in the UK, but merely having a Sark
director means it qualifies for Sark tax benefits, has the right to
keep its financial affairs secret and need not name other directors.
Over 6,000 companies are controlled from the UK and many thousands
more which are linked to the Caymans, the British Virgin Islands and
Panama have nominee directors in Sark.
Lawyers
and accountants are paying hundreds of pounds to Sark residents for a
no-questions-asked signature. People whose parents were literally
serfs have earned as much as a quarter of a million pounds. Who can
blame them?
Is
Sark, smallest of the Channel Islands, actually an independent state?
A booklet on pension rights for expats, issued by the UK Department
of Social Security shows it as a country along with Guernsey and
Jersey – listed between the Philippines and Switzerland.
Strictly
speaking the Channel Islands are British Crown dependencies. The
Seigneur de Sercq pays the British Crown at the bargain rate of £1.79
a year for the privilege of running the island, in consultation with
the island's governing body, the Chief of Pleas.
All
of the Channel Islands are responsible for their internal affairs,
and that includes tax legislation or in Sark's case, lack of it. Sark
has managed very nicely up till now with the £1 landing tax
paid by day-trippers from Guernsey, plus duties charged on imported
tobacco and alcohol, which in total raise about £250,000.
The
Treasurer of Sark, Trevor Hamon, does not see the need for company
legislation, commenting, “It would be a step nearer to having
income tax, which is one thing we don't want.”
The
Chief of Pleas, which meets three times a year in a school building,
has discussed ways of safeguarding the island's new-found wealth from
the threat of international regulations. Its “Deputy of the
People,” Philip Stokes, comments, “The directorships bring a lot
of money into the economy, which circulates and raises the standard
of living.”
Who
do you contact if you're looking for a Sark director for your
company?
You
could start with the Seigneur de Sercq himself, Michael
Beaumont, who has four
directorships, principally in the property business, or his wife, who
has nine.
Or
then there's that leading opponent of company legislation and income
tax, the Treasurer of Sark,
Trevor Hamon (also
the island's blacksmith), who took on twenty-five new directorships
in 1995 alone. “Having the companies controlled from here is a
sensible thing because we have got no tax,” he comments. He can be
contacted by fax at his home at “Rose Cottage.”
Domenique
Wakley, fisherman and driver of
a horse-drawn carriage, is director of twelve companies. When asked
which companies they were he retorted, “God knows. I just sign. All
the ones I've been doing lately are German anyway. There's nothing
illegal about it.”
If
you're worried you might be breaking the law, why not talk to Sark
police officer, Philip
Perree? As well as making up
half of the island's part-time police force, he is director of
seventeen companies. In his spare time he farms, and runs a hotel and
a horse-and-cart business.
Retired
Royal Navy commander,
Palliser Hudson, a
respected pillar of the community, has taken on more than 150
directorships in five years.
The
most experienced director must be Philip Crowshaw,
a “business consultant,”
whose firm is based at his home, “Mon Desir.” He has over 1,000
directorships and his estranged wife Belinda Crowshaw
has more than 350.
If
you want the alternative options of a Sark director for your company
or Sark “residence,” your choice must be “Le Petit Jardin”
(“The Little Garden”), owned by retired baker, Jim
Shelley. According to the
telephone directory fourteen people live at this address, which is
also the office of three companies.
You're
not likely to find anyone at home, and office space is strictly
limited. Shortage of room has obliged another company, the
International Tourist Club to set up office in Mr Shelley's home.
This isn't too inconvenient, as “Le Petit Jardin” is a converted
greenhouse, just across the lawn.
But
all phone calls are dealt with promptly – using a battery of
answering machines. Messages can be accessed by remote control from
anywhere in the world, and mail will be redirected by the forwarding
service run by Mr Shelly and his daughter Julie Mann.
Neither
the Seigneur de Sercq nor the Chief of Pleas is happy about this
service, as they suspect that wealthy people may be trying to
persuade tax authorities elsewhere that they are Sark residents.
But
the feudal overlord's main gripe seems to be that he didn't think of
it first. “What really angers people is it's being done by people
coming in from outside using Sark themselves and making a killing
from it.”
The
UK Inland Revenue commented, “If you were in the UK for more than
six months in a year you would be resident there for tax purposes, no
matter if you had an address in Sark. To say otherwise would be a
false declaration. That in itself would not be a criminal offence but
avoiding any tax you were liable for would be.”
An
accountant in the longer-established haven of Guernsey, Alan
Donaldson, agreed “as far as residents or people who are domiciled
in the UK are concerned,” saying it was “tantamount to tax
evasion.” But he added, “Whether the same is true for people
living in countries outside the UK is different. It may be they can
legally avoid paying tax.”
Whatever
the uncertainties about the legality of using Sark to avoid personal
income tax, it appears that the ploy of using a Sark director for
your company is at present perfectly legal, no matter how much the
authorities elsewhere may disapprove of it.
