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Revealed: how Tory co-chair’s offshore film company indirectly benefited from £121k tax credits

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Revealed: how Tory co-chair’s offshore film company indirectly benefited from £121k tax credits

Ben Elliot, the Conservative party’s embattled co-chair, jointly owned a secret offshore film financing company that indirectly benefited from more than £120,000 of UK tax credits.

The revelation that Elliot has a British Virgin Islands-based company – which he owns with Ben Goldsmith, the brother of the Tory peer and minister Zac – will raise fresh questions for the businessman, whose courting of ultra-wealthy but controversial political donors has already provoked widespread criticism.

On Monday, the Pandora papers – the largest leak of offshore data in history, which has been shared with the Guardian and other media by the International Consortium of Investigative Journalists – helped expose how a series of substantial Conservative party funders are facing a range of allegations about their links to offshore finance.

Today, the same leak shines a light on a BVI company Elliot and Goldsmith created to fund the making of Fire in Babylon, the pair’s 2010 documentary film about the great West Indies cricket team of the 1970s and 80s.

Analysis of financial disclosures suggests the duo’s BVI company held a controlling stake in a British subsidiary that made the film. The UK company received a £600,000 loan from its BVI parent in 2008, plus £121,000 from a government scheme designed to incentivise film production in the UK between 2009 and 2011.

The film made a small loss, and without the tax credits the subsidiary would not have been able to fully repay its offshore creditors, the largest of which was Elliot’s and Goldsmith’s BVI company, which had loaned the UK business most of its funds.

While the arrangement does not appear to have breached any tax regulations or laws, it does raise questions about whether government film schemes should be helping to fund projects that are controlled in a tax haven. If Fire in Babylon had become profitable, then the structure might also have provided some tax advantages.

Elliot, a well-connected Old Etonian and the nephew of the Duchess of Cornwall, co-owns luxury concierge group Quintessentially, which has earned him a reputation as a fixer for the super-rich. He is credited with raising a record £37m for the Tories’ general election campaign in 2019.

Goldsmith, who also attended Eton, is a financier and a non-executive director at the Department for Environment, Food and Rural Affairs (Defra), where his brother is a minister.

Both Elliot and the Goldsmiths are close to Boris and Carrie Johnson. In July 2020, Elliot screened Fire in Babylon for the prime minister and his wife at their Downing Street flat, with the chancellor, Rishi Sunak, and Ben Goldsmith also present.

“I got a call saying the PM was planning to watch Fire in Babylon and would I like to come along. Ben [Elliot] was there too. They loved it,” Goldsmith said.

The film, which starred cricketing greats including Sir Vivian Richards and Michael Holding, failed to achieve commercial success.

Analysis of company filings suggests the documentary made a £70,000 loss. Without the HMRC cash rebates, it appears the UK business would not have been able to fully repay its offshore investors – the largest of which was Elliot and Goldsmith’s BVI company, E&G Productions, which had provided the £600,000 loan.

Goldsmith said a group of cricket enthusiasts had financed the film, chipping in £5,000 to £100,000 each. It is not clear if these contributions – mostly made by UK residents – were then converted into the £600,000 offshore loan from a BVI company, nor how much came from Goldsmith and Elliot.

One former HMRC tax inspector, who reviewed the structure, said: “In practice, I cannot see that the use of the BVI company by two UK residents could be anything other than tax motivated.”

Prem Sikka, emeritus professor at Essex Business School and a Labour peer, added: “With tax havens, there are two advantages: opacity and tax avoidance. There’s nothing else there.”

Elliot and Goldsmith, who were both prominently credited as “executive producers” on the film, said the project was never expected to make a profit and so the choice of the BVI was not intended to avoid taxes.

Goldsmith confirmed to the Guardian that, at the time the film was being financed and made, he was a so-called “non-dom”, meaning he did not have to pay UK tax on overseas earnings and assets, despite being a UK resident.

For non-doms, only income and capital gains generated in the UK – or funds sent back to the UK – would attract tax.

So by investing in Fire in Babylon in the form of a loan from the BVI, rather than by a direct remittance to the UK company, Goldsmith appears to have ensured his investment was tax-free.

Also, had the film proved to be a commercial success, experts said the structure could have meant that profits flowed offshore. Money from TV screening deals with foreign territories such as Australia or India, for example, could have avoided UK tax for Goldsmith.

Elliot and Goldsmith added: “A Caribbean company was used at the outset because we anticipated securing investment to make Fire in Babylon largely from investors outside the UK and specifically in that part of the world. As it turned out, more UK-based investors than we expected backed the film, although as you have spotted, some of the film’s investors were indeed in the Caribbean.”

However, Fire in Babylon appears to have only attracted two Caribbean-based investors, and an offshore finance expert challenged the idea that a BVI company would have encouraged others.

“It is no more attractive for Caribbean investors to invest in a BVI company than a Netherlands company, or a Luxembourg company,” he said. “Perhaps even the reverse, as generally there is little substance to litigate. If anything, BVI is less attractive to a Caribbean investor.”

While Elliot and Goldsmith say that the film was always unlikely to make a profit, the creators appear to have been more optimistic at the time.

The Guardian has seen the contract used by the film-makers to persuade the cricketing greats to appear in the film, without whom there would have been no documentary. It states that the players were paid a nominal fee, but also promised a share of the film’s profits in return for their participation.

A spokesperson for Elliot and Goldsmith said: “The film was made by a UK company and subject to UK taxation. All taxes have been correctly and transparently declared to the relevant authorities.”

Neither Elliot nor Goldsmith answered the Guardian’s questions about whether any loan interest was paid by the UK production company to their offshore company, nor why the pair’s names were initially kept off publicly available Companies House filings, which would have shown how they had a controlling stake in the UK production company via their BVI company.

The connection only formally emerged in 2016, when Elliot and Goldsmith were registered as “persons of significant control” of the UK firm, WIB Productions Ltd, which made the film.

They said the idea that they “might have attempted to conceal our involvement in the making or financing of Fire in Babylon is patently absurd, given our names were all over it from the start, in the credits, on the invitations, in newspaper and radio interviews and so on.”

Goldsmith added: “It is a love letter to one of the great sporting stories of all time.”

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Ethiopian Airlines Wins Bid For Nigeria Air

The Federal Government has selected the Ethiopian Airlines (ET) Consortium as preferred bidder for Nigeria Air.

Minister of Aviation, Sen. Hadi Sirika disclosed this in a media briefing on Friday in Abuja.

He said ET scored 89 percent out of 100 as regards the technical bid and 15 out 20 as regards financial bid.

Mr Sirika said the Request for Proposal (RFP) under the Public-Private Partnership (PPP) Act, governed by Infrastructure Concession Regulatory Commission(ICRC) regarding the Nigeria Air was now completed.

He said, “After a careful, detailed and ICRC governed selection process, Ethiopian Airlines (ET) Consortium has been selected as preferred bidder, offering an owner consortium of 3 Nigerian investors.

“The Nigerian investors are MRS, SAHCO and the Nigerian Sovereign Fund (46%), FGN owning 5% and ET 49%. The consortium has been subject to a due diligence process.

“The contract will be negotiated between consortium and FGN leading to a Full Business Case (FBC) which will be expected to be approved by the Federal Executive Council (FEC). We expect this process to take 6-8 weeks.”

The minister said the national carrier would be launched with three Boeing 737-800 in a configuration very suitable for the Nigerian market.

Mr Sirika said Nigeria Air will be launched with a shuttle service between Abuja and Lagos to establish a new comfortable, reliable and affordable travel between the two major Nigerian Airports.

“The first aircraft is ready to arrive in Abuja for the further work and NCAA inspection, demo flights and audit as part of the AOC requirements.

“In time, two others will arrive to complete the required three aircraft for a new AOC holder. The interim executive team has prepared, with the support of FAAN.

“The team has arranged for Terminal C at the Abuja Airport and finalised a contract with MMA 2 terminal in Lagos, for the operation of an initial shuttle between Lagos and Abuja,” he said.

The Operations Control Centre (OCC) at the Abuja Airport would act as Headquarters of the airline.

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UK slashes personal, corporate taxes in bid to spur growth

UK slashes personal, corporate taxes in bid to spur growth

Britain’s new government on Friday announced a sweeping plan of tax cuts it said would be funded by borrowing and revenues generated by anticipated growth, as part of contentious moves to combat the cost-of-living crisis and bolster a faltering economy.

But Treasury chief Kwasi Kwarteng offered few details on the cost of the program and its impact on the government’s own targets for reducing deficits and borrowing. The government’s two-pronged approach offers short-term help for homes and businesses struggling with soaring energy costs while betting that lower taxes and reduced red tape will spur economic growth and increase tax revenues in coming years.

“We need a new approach for a new era, focused on growth,” Kwarteng told lawmakers in the House of Commons.

Friday’s statement was billed as a “fiscal event” rather than a budget, because it wasn’t accompanied by an analysis of its cost from the independent Office for Budget Responsibility. Opponents said the government was dodging scrutiny.

The plan was immediately attacked by the opposition Labour Party for favoring the interests of business over working people and failing to provide any analysis about the impact on the government’s fiscal targets.

“It is a budget without figures, a menu without prices,” said Rachel Reeves, Labour’s spokeswoman on Treasury issues. “What has the chancellor got to hide?”

Many economists have expressed concern that the government’s policies will lead to a sharp increase in borrowing, undermining confidence in the British economy. The pound on Friday fell below $1.12 for the first time since March 1985.

The program announced Friday reverses many of the initiatives announced by former Prime Minister Boris Johnson, another Conservative. The center-right party has led Britain for the last 12 years.

For example, Kwarteng annouced that he was reversing a hike in national insurance taxes introduced by Johnson’s government in May to boost spending on health and social care. Kwarteng said the government would maintain expected funding for the National Health Service — but he didn’t say how.

He also said the government would cut the basic rate of income tax to 19% next year, from the current 20%. The top rate will drop to 40% from 45%. He also canceled a planned six percentage point increase in the corporate tax rate, leaving it at 19%.

“This was the biggest tax-cutting event since 1972, it is not very mini,” said Paul Johnson, director of the Institute for Fiscal Studies, an independent think-tank that scrutinizes government spending. “It is half a century since we have seen tax cuts announced on this scale.”

The announcement comes just three weeks after Prime Minister Liz Truss took office. She has said the Conservative government’s core mission is lowering taxes to drive economic growth and declared this week that she was ready to make “unpopular decisions” such as removing a cap on bankers’ bonuses to attract jobs and investment.

The plan runs counter to the view of many Conservatives that governments shouldn’t rack up huge debts that taxpayers will eventually have to pay.

Reeves criticized the government for expecting taxpayers to foot the bill for its initiatives, rather than increasing a tax on the windfall profits of energy producers benefiting from soaring prices for oil and natural gas.

A cost-of-living crisis driven by steeply climbing energy costs and slowing economic growth are the biggest challenges Truss faces.

Inflation stands at 9.9%, near the highest Britain has seen since the 1980s, and is predicted to peak at 11% in October.

The government denied it was gambling the economy on a “dash for growth,” but many economists said it was taking a huge risk by allowing borrowing to balloon while the economy is weak and inflation is high.

The Bank of England said Thursday that the U.K. may already be in recession, defined as two consecutive quarters of economic contraction. It expects gross domestic product to fall by 0.1% in the third quarter, below its August projection of 0.4% growth. That would be a second quarterly decline after official estimates showed output fell by 0.1% in the previous three-month period.

In the past two weeks, the government has announced th at the government would cap gas and electricity bills for households and businesses, amid fears that the poorest won’t be able to afford to heat their homes and companies will go bust this winter. Kwarteng said this initiative would be funded by borrowing.

Kwarteng also announced new “investment zones” across England where the government will offer tax cuts for businesses and help create jobs. He will also give details on how the government aims to accelerate dozens of major new infrastructure projects, including in transportation and energy.

Truss — who is inspired by Margaret Thatcher’s small state, free market economics — has insisted that growing the economy and tax cuts for businesses will benefit everyone in the country.

But critics say Truss’s right-wing instincts are the wrong response to the U.K. economic crisis.

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Boeing to pay $200m over 737 Max crash statements

Boeing to pay $200m over 737 Max crash statements

The US stock market regulator said the aviation giant and its former chief executive Dennis Muilenburg made false statements about safety issues.

Boeing “put profits over people” in an effort to rehabilitate its image, according to the Securities and Exchange Commission (SEC).

The 737 Max was grounded for 20 months after two crashes killed 346 people.

As part of the settlement Mr Muilenburg will also pay a penalty of $1m.

“In times of crisis and tragedy, it is especially important that public companies and executives provide full, fair, and truthful disclosures to the markets,” SEC chairman Gary Gensler said in a statement.

Boeing and Mr Muilenburg “failed in this most basic obligation,” he added.

The SEC’s statement also said that both Boeing and Mr Muilenburg did not admit or deny the regulator’s findings.

“We will never forget those lost on Lion Air Flight 610 and Ethiopian Airlines Flight 302, and we have made broad and deep changes across our company in response to those accidents,” Boeing said in response to the SEC’s announcement.

“Fundamental changes that have strengthened our safety processes and oversight of safety issues, and have enhanced our culture of safety, quality, and transparency,” the company added.

The SEC said a fund will be established for investors who suffered losses due to the misleading information between 2018 and 2019.

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Analysis box by Theo Leggett, business correspondent

This settlement is largely symbolic. The 737 Max scandal has already cost Boeing tens of billions – another $200m will barely register.

But it does give the SEC the chance to call out Boeing and its ex-chief executive Dennis Muilenburg for making assurances about the plane’s safety, when they already knew it had a serious problem – thereby misleading investors.

It’s unlikely this will cause Boeing any meaningful harm. Its corporate reputation had already been severely damaged by the affair. The company is now working hard to restore it, and regain public and investor confidence.

For Mr Muilenberg himself, the financial consequences of the settlement won’t be that painful either. He received some $60m in compensation and benefits when he left the company. But the fact that the SEC chose to charge him personally sends out a powerful signal.

There have been criticisms in some quarters that the ex-boss has not been properly held to account for his role in the affair. On this occasion, though, the finger has been pointed squarely in his direction.

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On 29 October 2018, Lion Air Flight 610 crashed into the Java Sea 13 minutes after taking off from Jakarta’s Soekarno-Hatta International Airport, killing all 189 passengers and crew.

Less than five months later, Ethiopian Airlines Flight 302, another Boeing 737 Max on its way to Kenya, crashed six minutes after leaving Ethiopia’s capital Addis Ababa. All 157 people on board were killed.

The crashes were linked to a flight control system called the “Maneuvering Characteristics Augmentation System” (MCAS) in the Boeing 737 Max.

The SEC said that “after the first crash, Boeing and Mr Muilenburg knew that MCAS posed an ongoing airplane safety issue, but assured the public that the 737 Max was safe to fly.

The crashes have cost Boeing more than $20bn, including payments to families of those killed in the crashes.

In the wake of the incidents, the US Congress passed new legislation reforming how the country’s aviation regulator, the Federal Aviation Administration (FAA), certifies new planes.

A small number of trials are expected to start next year to resolve outstanding claims.

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