Secretive Jersey firm bought Co-op Bank assets

THE Co-op Bank sold its portfolio of more than 1,000 repossessed homes to a secretive company registered in the offshore tax haven of Jersey.

Last week the bank completed the £157.5m sale of its Illius Properties division to Salmon Real Estate.

But it is not possible to find out who is behind the business because it was registered by an agent in Jersey just last month.

Formation documents show the agent was Tim Knight of the JTC Group, an adviser which specialises in locations such as Jersey, Guernsey, the Caribbean and Luxembourg.

Being based in Jersey will allow Salmon to avoid capital gains tax on any property sales but the Government is clamping down on this offshore advantage.

A new law due to be introduced in April will make gains made by individuals, trustees and “closely held” non-residential companies and funds subject to tax at 28%. Rental income will attract tax at 20% under the non-resident landlord scheme. But Salmon might avoid the new rules on capital gains if it is a vehicle backed by a number of investors.

Karen Campbell, tax partner at Grant Thornton in Manchester, said: “Closely held usually means five or fewer shareholders so it’s unlikely the change would apply in a situation such as a fund where lots of people are involved.”

Salmon agreed to pay £9.8m in cash for the portfolio of nearly 1,400 homes and take on an Illius debt to the Co-op Bank of £147m.

Illius was set up in 2008 by the Britannia Building Society to acquire repossessed homes. It would then refurbish them and let them to tenants or sell them on. The Co-op took it on following its 2009 merger with Britannia and last year it became the responsibility of the Co-op Bank when a bail out left the Co-op Group with just 20% of the shares.

Despite large holding held by New York hedge funds the Co-op has stressed its commitment to maintaining the ethical position it championed for many years. Following the reorganisation it said it will only be able to use the Co-operative if it keeps an ethical stance. This will be overseen by an independent director who will chair an ethics and values committee.

In the twelve month period to 4 January 2014, Illius recorded revenue of £8.9m and a pre-tax loss of £5.9m. Its assets were valued at £162.2m in January.