Paradise Papers reveal that Aberdeen-based oil firm used Bermuda offshore tax haven

Ithaca Energy spokesman
Ithaca Energy spokesman comments on the Paradise Papers

An Aberdeen-based oil firm – Ithaca Energy –  used an offshore haven for its “tax position,” according to documents from the Paradise Papers.

Ithaca Energy set up a “shell” company in the tax haven of Bermuda in 2012 to purchase its share in a $50m (£38m) North Sea oil production platform.

In the leaked papers, Ithaca stated it was “important” to its tax position the company was controlled from Bermuda. Ithaca said its tax charges “are not reduced” by the Bermudian company.

A spokesman for the energy firm told the BBC the offshore company “was set up for corporate structuring reasons”.

Bermuda is a popular offshore financial centre because it does not levy income tax or capital gains tax.

Documents held by law firm Appleby and seen by the BBC suggest Ithaca, which is listed on the Toronto Stock Exchange, was being managed and controlled from Scotland and Canada – not Bermuda.

Although the arrangement is not illegal, this could allow UK tax authorities to challenge the structure.

Ithaca purchased almost 50% of two companies called FPF1 Limited and FPU Services, based in another tax haven, Jersey.

These companies in turn owned and leased the FPF-1 floating production unit, an oil platform the length of a football pitch and almost 30 metres high.

FPF-1 was modified for use in the Stella fields in the central North Sea and began production in February this year.

Immediately before the purchase of shares in the Jersey companies, Ithaca sought out law firm Appleby in Bermuda to set up a new holding company. This would own its shares in the Jersey companies.

A Bermudian bank account was also set up for Ithaca and was “heavily capitalised”.

This enabled it to finance the purchase of the oil platform and the required modifications through a series of inter-company loans to the Jersey companies.

In emails seen by BBC, it was made clear by Ithaca’s legal team that: “It is important for our tax position that the company is managed and controlled from Bermuda.”

However, the Paradise Papers reveal:

  • minutes of board meetings were being prepared from Aberdeen
  • a board meeting was held in Bermuda with no-one physically present on the island (Ithaca’s chief financial officer, Graham Forbes, phoned in from Scotland and board member Chuck Lee joined the call from Canada)
  • on other occasions, Forbes flew into Bermuda for a board meeting, despite there being no apparent commercial activity taking place in the country

Production from the oil platform only began this year, oil prices are low and UK producers are entitled to significant tax breaks which make it unlikely that there will be taxable profit from the production platform any time soon.

Graham Forbes, Ithaca’s chief financial officer, did not respond to questions about the purpose of the Bermudian company or about how it was managed and controlled.

9 Nov 2017

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