Third of Scotland’s big wind farms linked to tax havens including Cayman
Islands
By Rob Edwards and Ally Tibbitt
Nearly a third of Scotland’s biggest wind farms have owners with links to
offshore tax havens in the Cayman Islands, Luxembourg, Guernsey and Jersey.
An investigation by The Ferret has also revealed that 39 of the largest 50
wind farms are ultimately owned outwith Scotland in England, Spain, France,
Germany, Norway, China and elsewhere.
Campaigners allege that the wind industry’s tax havens have deprived public
services of “many millions” of pounds, while boosting private profits.
Scotland’s renewable energy wealth is being “looted” by international tax
avoiders, and profits “siphoned overseas”, they say.
According to experts, wind farm ownership is “opaque” and “secretive”. The
“bright green image” promoted by the renewable energy industry is “more a
murky shade of grey”, says one.
The Scottish Government criticises companies that exploit “artificial
arrangements simply to reduce their tax liabilities”. But it points out
that corporation tax is controlled by Westminster.
Some wind farm owners defend the use of tax havens as “standard across the
industry” to ensure that “investors are not in a disadvantageous tax
position”. Others stress that their offshore companies have “no connection”
to their wind farms, and that the beneficiaries include UK pension funds.
Companies also point out they pay taxes that are due “in the markets in
which they operate”. There is no evidence that any of the companies are
breaking the law.
Wind is now the largest generator of electricity in Scotland, with a
massive nine gigawatts of power installed over the last 20 years. On windy
days, it can provide all the electricity the country needs.
It is seen by many as the industry that is ousting North Sea oil as the
economy’s dominant energy supplier. Because wind turbines do not emit
carbon, they are also regarded as vital in the battle to cut climate
pollution.
But concerns have been growing about who is benefitting from the wind power
boom, with some fearing that “big wind” could emulate “big oil” in avoiding
taxes, exporting profits and short-changing communities.
In November 2020 The Ferret reported that one leading wind farm company,
Ventient Energy, was under fire for avoiding tax. It was registered in
Luxembourg in Europe and owned in the Cayman Islands, a British overseas
territory in the western Caribbean Sea.
Now we have analysed the ownership of all of Scotland’s 50 biggest wind
farms. We drew on the database of energy projects maintained by the
industry body, RenewableUK, as well as records held by the UK Government’s
Companies House and company reports.
We discovered that the use of offshore tax havens is widespread. At least
16 of the 50 farms have owners with verifiable links to the Cayman Islands
and Luxembourg, as well as to the islands of Guernsey and Jersey in the
English Channel.
These are all places highlighted by campaign group, the Tax Justice
Network, as helping multinationals to hide and avoid tax. They are listed
amongst the world’s worst 20 jurisdictions for financial secrecy and tax
avoidance.
The Cayman Islands are ranked worst in the network’s financial secrecy
index and second worst in its tax haven index. Luxembourg is sixth worst in
both the tax haven and secrecy indexes.
Jersey is the eighth worst tax haven and 16th worst on financial secrecy.
Guernsey is the 11th worst for financial secrecy and the 17th worst tax
haven.
Many of the wind farms have multiple owners, involving up to four different
companies. Sometimes the links to tax havens are direct and clear, but in
other instances they are indirect.
We have identified eight owners or part-owners linked to tax havens, in
addition to Ventient Energy. They are multinational asset and investment
management firms, often with complex webs of different companies in
different countries.
The investment company, Equitix, which owns 17.5 per cent of the huge
Beatrice wind farm in the Moray Firth, is registered in the Cayman Islands.
Its parent company, Tetragon, is registered in Guernsey.
The Renewables Infrastructure Group also owns 17.5 per cent of Beatrice, as
well as 49 per cent of Crystal Rig in Scottish Borders, Paul’s Hill and
Rothes in Moray and Mid Hill in Aberdeenshire. It is based in Guernsey.
Dalmore Capital owns a quarter of the Dorenell wind farm in Moray and a
quarter of Corriemoillie, near Garve in Highland region. It has three
companies registered in Jersey.
Aviva Investors owns 49 per cent of Brockloch Rig extension at Carsphairn
in Dumfries and Galloway. Its infrastructure income unit trust is
registered in Jersey.
Blackcraig wind farm at Balmaclellan in Dumfries and Galloway is controlled
by Gravis Capital Management and Temporis Capital. The former has two
investment companies registered in Jersey, while the latter has two
companies in the Cayman Islands.
Harburnhead wind farm in West Lothian is half-owned and managed by Gresham
House companies. Gresham House also owns an investment management company
in Guernsey.
Fallago Rig in the Lammermuir Hills is 80 per cent owned by a subsidiary of
Hermes Infrastructure. Hermes has a company in Guernsey, but said it was
“entirely unrelated” to the wind farm, whose owner paid UK taxes.
Two other wind farms at Aikengall in East Lothian are owned by a company
called Community Windpower. According to Companies House, it was controlled
by Swiss Renewable Energies based in Jersey until 31 May 2018.
Altogether Scotland’s biggest 50 wind farms, ranked by the amount of
electricity they are capable of generating, have 31 owners. Just 11 are
owned in Scotland by Scottish companies.
The remaining owners are in England (12), Spain (10), Norway (8), France
(3), Germany (2) and elsewhere. Two Chinese companies, Gingko Tree
Investment and Red Rock Power, have stakes in four wind farms.
The analysis of wind farm ownership was carried out by renewable energy
consultant, Helen Snodin, in conjunction with The Ferret. “The renewable
energy sector is unrecognisable from its niche beginnings,” she said.
“Wind power is the present day conventional technology and with that comes
social as well as environmental responsibility. Ultimately we should care
about tax revenues, and the destination of investment and profit.”
She pointed out that Scotland had lost some state and private owners, and
cautioned that the use of tax havens could rise. Some foreign ownership
outwith havens could bring benefits, she argued.
“Ownership isn’t necessarily indicative of investment. There are plenty of
examples of foreign domiciled owners with a great track record of
investment in, and commitment to, Scotland.”
The private finance think tank, European Services Strategy Unit, attacked
the use of tax havens. “Company accounts are so opaque, it’s hard to know
for sure how much tax they have avoided paying,” said the unit’s director,
Dexter Whitfield.
“But these firms could well have deprived the public sector of many
millions of pounds over years, while boosting their profits. They register
in secretive offshore tax havens solely to increase profits for
shareholders by avoiding UK tax.”
He added: “This ultimately reduces government revenue to fund public
services and the welfare state. It’s hardly the bright green image promoted
by the renewable energy industry more a murky shade of grey.”
Whitfield argued that The Ferret’s analysis raised the question of who
should ultimately own and control renewable energy in Scotland. “It is a
vital part of a just transition strategy for climate change and for the
future of local and regional economies,” he said.
The Tax Justice Network warned that the pattern of wind farm ownership
would result in “significant revenue losses” for Scotland. “Without
pointing the finger at individual companies, the evidence is clear,” said
the network’s chief executive, Alex Cobham.
“On average investments that are made through financial secrecy
jurisdictions and corporate tax havens will result in much higher levels of
tax abuse.”
According to Friends of the Earth Scotland, wind farm ownership was
“sometimes stuck in the tax avoiding excesses” of the past. “Climate change
has been created by the unrestrained pursuit of profit,” said the
environmental group’s director, Dr Richard Dixon.
“Addressing climate change needs to be more than business as usual with a
different technology. Any company that wants to be seen as part of the
solution needs to be contributing back to society, including paying proper
taxes.”
Scottish Labour warned that wind industry links to offshore tax havens
“undermined democratic control” of the energy sector. “SNP ministers have
allowed our wind farms to be owned and controlled by shadowy overseas
interests, instead of communities in Scotland reaping the rewards,” said
the party’s energy spokesperson, Monica Lennon MSP.
Labour MSP, Paul Sweeney, added: “The huge renewable energy wealth
potential in Scotland is being looted from our people by international tax
avoidance through these elaborate offshore ownership structures.
“Despite its vast wealth-generating potential for the country, the profits
from generation are being siphoned overseas. It truly is a national
scandal, and fixing it must start by asserting Scottish ownership across
the whole energy sector.”
The Scottish Greens criticised successive UK governments for failing to
tackle tax avoidance. “It’s vital that serious action is taken to end this
unscrupulous behaviour,” said the party’s co-leader, Lorna Slater MSP.
“Scotland’s fairer and greener future cannot be built on the back of tax
avoidance.”
The Scottish Government pointed out that it had no powers over corporation
tax, which was reserved to the UK parliament.
“We believe that businesses have an ethical obligation to deal openly with
their tax affairs and not to engage in artificial arrangements simply to
reduce their tax liabilities,” said a government spokesperson.
“These principles sit at the core of our Scottish approach to taxation. We
believe in fair taxation that supports economic growth and protects
Scotland’s position as an attractive proposition for overseas investors.”
Tax havens ‘standard across the industry’
The Ferret contacted all the wind farm owners with links to offshore tax
havens for checks and comments. One, which didn’t wish to be directly
quoted, defended the practice.
“The use of offshore funds structures is standard across the industry and
helps enhance the returns for investors, including ultimately retail
customers and pension funds,” it said.
“They ensure that the investment returns on their assets accrue in the
country where they are tax resident. In addition, as with any other major
asset management company, our objective is to attract a global client base
and non-UK structures are often the most efficient way for us to do that.”
The company stressed that the ultimate investors were UK pension funds.
“Any revenues we earn from managing our investors’ assets in the funds we
manage are fully subject to tax in the jurisdiction where the asset manager
of that fund is resident, typically the UK.”
The Renewables Infrastructure Group (TRIG) was open about being registered
in Guernsey. “TRIG is a Guernsey-registered investment company, which is
not uncommon for UK-listed investment companies,” it said.
“Tax is paid by the portfolio companies in the markets in which they
operate and by the company’s shareholders on the dividends they receive,
according to the jurisdiction and taxation status of each shareholder.”
The company added: “The structure ensures investors are not in a
disadvantageous tax position compared to direct investors in infrastructure
projects. In effect this emulates the structure formalised for real estate
investors.”
A TRIG spokesperson also pointed out that the company held the London Stock
Exchange’s green economy mark. “TRIG’s shareholder register is over 90 per
cent UK based and comprises institutional investors, such as pension funds
and multi-asset managers,” the spokesperson said.
A spokesperson for Gravis Capital Management (GCP) said: “I can confirm
Gravis Capital Management Limited is a fund manager and does not own
renewable energy assets. GCP Infrastructure Investments Limited and GCP
Asset Backed Income Limited are investment companies listed on the London
Stock Exchange, incorporated in Jersey.”
A spokesperson for Gresham House said: “The Harburnhead wind farm is
part-owned by an institutional fund that is a limited partnership
registered in England and Wales, managed by Gresham House Asset Management
Limited on a discretionary basis, on behalf of UK institutional clients
(local authority and corporate pension schemes) and UK private clients.”
The company added that there was “no connection” between the firm that
part-owned the wind farm and the Gresham House investment company in
Guernsey other than the fact that the management company and the Guernsey
company were both “wholly owned subsidiaries of Gresham House plc.”
Hermes Infrastructure pointed out that the “owning entity” of Fallago Rig
wind farm was based in Scotland and was “fully compliant” with UK tax
requirements. The Hermes infrastructure company registered in Guernsey “is
entirely unrelated to Fallago Rig Wind Farm”, a spokesperson said.
A report on public engagement by Hermes in 2019 highlighted the problems
that could be caused by avoiding paying tax. “Tax avoidance has a serious
knock-on effect on society as governments are less able to fund schools,
hospitals and other vital services,” it said.
Aviva Investors confirmed that its infrastructure income unit trust was
registered in Jersey. Scottish Renewables, which represents the industry,
declined to comment, as did Equitix, Dalmore Capital, Temporis Capital,
Ventient Energy, and Community Windpower.
Making tax fair
Companies that bid for public wind farm contracts should have to prove that
they pay their taxes fairly and openly, says the campaign group, Tax
Justice Network.
It is calling on politicians to require firms to sign up to the Fair Tax
Mark. This is an independent accreditation system that recognises firms
that “pay the right amount of corporation tax at the right time and in the
right place”.
Alex Cobham, chief executive of the Tax Justice Network and a technical
advisor to the Fair Tax Mark, argued that good companies would be keen to
show that they paid a fair share of taxes.
“Companies seeking to benefit from clean energy subsidies should be
completely transparent about their finances, including their tax conduct,”
he said.
“To protect Scottish revenues, and to limit the damage that is done when
tax-compliant local businesses are unfairly outcompeted, politicians should
consider requiring the Fair Tax Mark from all companies in this sector.”
Cobham pointed out that the issue had been discussed in the last Scottish
Parliament. “One issue was that the approach might have clashed with
European Union procurement rules but of course these no longer apply,” he
said.
One leading Scottish energy company, Perth-based SSE, has already been
awarded the Fair Tax Mark. Its business, SSE Renewables, owns or part-owns
nine of the biggest 50 wind farms in Scotland.
“Tax matters. It helps to fund vital public goods and services and when
paid fairly, it ensures a level playing field for businesses large and
small,” the company said.
“SSE does not take an aggressive stance in its interpretation of tax
legislation and will not use artificial tax avoidance schemes or tax havens
to reduce its costs. SSE’s profits are taxed in the locations where it has
business substance.”
The Scottish Government didn’t comment directly on the Fair Tax Mark. But
it stressed that wind farm companies should help make sure that Scotland
benefits from their investments.
“We expect developers who benefit from Scotland’s natural wind resource to
engage with the domestic supply chain, from the outset, to ensure that
businesses and communities located in Scotland are in a position to
maximise the economic opportunities that the construction of wind farms
offers,” said a government spokesperson.
Scottish ministers have also backed Community Energy Scotland, a charity
which supports locally-run renewable projects. It highlighted research in
June 2021 suggesting that community owned wind farms paid communities 34
times more than private companies.
The consultancy, Aquatera, compared nine community owned and four private
wind farms in Scotland. It found that returns from the community owned
farms averaged £170,000 per installed megawatt per annum, far exceeding the
£5,000 paid by commercial firms.
The research was commissioned by the Point and Sandwick Development Trust,
which owns the UK’s largest community wind farm on the Isle of Lewis.
“Community energy punches way above its weight in financial and economic
terms,” said the trust’s chair, Norman Mackenzie.
“If governments really want to level-up and to spread the benefits of the
green economy to all parts of the country, then they need to make community
energy a central pillar of their climate policy and not just a nice-to-have.”
Community Energy Scotland is working to increase community ownership to
maximise local benefits. “We would support Community Land Scotland in their
endeavour to increase community ownership and to favour the use of credit
unions, ethical finance and co-operative models of ownership,” said the
charity’s chief executive, Janet Foggie.
“If capital is being brought in for commercial projects then we would argue
strongly for ethical banking approaches, and favour community benefit
payments as a means of ensuring at least some benefit is returned to local
people. However community ownership is still the preferred model.”
A spreadsheet summarising ownership of Scotland’s biggest wind farms can be
downloaded here.
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