HMRC urged to investigate asylum hotel firm over payments to apparent offshore company

Tax experts have called for HMRC to investigate millions of pounds of payments made by a key provider of asylum hotels and housing to an apparent offshore consultancy firm with links to its Essex businessman founder.

Exclusive analysis of financial records for Clearsprings (Management) Limited – which generates most of its now £1.3bn annual turnover off the back of the taxpayer through Home Office contracts to house asylum seekers – has uncovered £16m worth of payments to ‘Bespoke Strategy Solutions Ltd’, a firm at least partly owned by Clearsprings’ founder and director Graham King.

The firm does not appear to be registered with Companies House, as is required of all limited companies in the UK, and searches of global corporate databases also reveal no matches for businesses of that name with links to King, the investigation by Liberty Investigates and Metro found. Tax experts consulted by reporters could also not locate the company.

Any payments to Bespoke Strategy Solutions may reduce Clearsprings’ UK tax burden by lowering its pre-tax profits. HMRC and the Home Office have now been urged to clarify what services were provided, and the potential tax benefits to Clearsprings and King.

Separate analysis of Clearsprings’ accounts shows that King – who has a 97% stake in the firm – recently extracted £70.5m in personal cash earnings from the company as profits spiralled in line with the government’s increasing reliance on emergency hotel accommodation to deal with an asylum claims backlog.

The tycoon, 57, who recently entered the Sunday Times Rich List thanks to his runaway success in the asylum sector, cashed in £47m in November 2022 via a share buyback, less than eight months after extracting £23.5m via the same mechanism, in March 2022.

Share buybacks are a legal way for private limited companies to purchase their own shares from shareholders. They can be used to redistribute excess profits and have potential tax advantages compared to dividend payouts. It is not known if Clearsprings or King benefitted from these, although there is no suggestion of illegality.

Clearsprings is a major Home Office supplier, housing tens of thousands of asylum seekers across the South of England and Wales via a network of subcontractors and middlemen. Since its current government contracts began in 2019, Clearsprings’ turnover has increased from £59.3m to £1.3bn, while net profits have increased by a factor of 413.

Green party peer Natalie Bennett said King was a “casebook example” of privatisation allowing public money to be “siphoned off into private profit”.

Speaking about the payments to Bespoke Strategy Solutions Ltd, Labour’s Dame Margaret Hodge, the former chair of the Public Accounts Committee, said all firms “which benefit from lucrative government contracts” must be held to the highest standards of probity, and “any unusual payments […] investigated thoroughly”.

The company’s accounts describe the payments as “administrative expenses in respect of consultancy services”, while noting that BSS Ltd is a “related party of Clearsprings (Management) Ltd by virtue of their common shareholder, G King”. In one instance the company is referred to as Bespoke Strategy Systems – which also does not appear to be listed on UK or global corporate registers.

In its latest financial accounts Clearsprings reported it had made £85.1m gross profit. After subtracting its administrative and other expenses, £74.4m profit was left for HMRC to tax.

Clearsprings has repeatedly declined or ignored requests to explain where BSS Ltd is registered, what services it provided, or the apparent name discrepancy – meaning it was not possible to contact the firm for comment. A company by the same name is registered in the United Arab Emirates – which affords greater secrecy to businesses than in the UK and offers many tax advantages – though it was incorporated several years after Clearsprings’ payments began.

Mike Lewis, associate at the Center for International Corporate Tax Accountability and Research, described the lack of transparency around the payments as “highly unusual”, while Alex Cobham, chief executive of the Tax Justice Network campaign group, said it “raises a serious question over the quality of the group’s accounts and the appropriateness of the claimed transactions”.

Lewis added: “It’s simple: Clearsprings needs to say where BSS Ltd is registered, and disclose who receives salaries and profits from it. Clearsprings’ auditor, and the government departments who oversee their contracts, also need to confirm that they’ve seen proof of the services provided by BSS Ltd in return for millions of pounds of public money.”

Clearsprings has reported payments to Bespoke Strategy Solutions in its five most recent financial filings, beginning with the 12 months to January 2019.

Claire Aston, director at TaxWatch, a UK charity that seeks to promote tax compliance, said she expected the Home Office and HMRC to carefully scrutinise the transactions in question. “Large payments to related parties for unspecified ‘consultancy services’ need to be closely examined by both the government department awarding the contract from public funds, and HMRC, given the incentives and scope for tax avoidance,” she said.

The government describes tax avoidance as “operating within the letter, but not the spirit, of the law”.

King, an entrepreneur from Canvey Island in Essex, founded Clearsprings in 1999. Salary, pension and dividend payouts on top of his recent share buybacks have brought the businessman’s known personal earnings to at least £74.2m since then, but with details of his remuneration package remaining secret for several of those years the true total is likely to be far higher.

Clearsprings stopped declaring the identity of its highest paid director in 2009. However, accounts for previous years show King earned £1.6m from his salary and pension between 2004 and 2008. In 2015, King’s annual salary was revealed to be £960,000. King has also earned £1.1m in dividends from the firm since 2010, including a £680,000 payout in 2015.

Alongside fellow asylum accommodation providers Serco and Mears, Clearsprings has faced accusations of poor accommodation standards and lack of care for residents. Reported issues at Clearsprings include broken facilities, rodent infestations, and abuse and bullying by accommodation staff.

Earlier this month an investigation by Liberty Investigates and Prospect revealed how King became one of Britain’s richest men off the back of government housing contracts, weathering a series of scandals and repeated accusations that his company provides substandard accommodation and poor resident care.

The Home Office has also been urged to provide clarity about the circumstances surrounding a £213,580 settlement Clearsprings reached with HMRC in 2015/16 following an inquiry into the company’s tax affairs. It was awarded its latest asylum seeker contracts in 2019, in a deal anticipated at the time to be worth £1bn over 10 years – though this would quickly prove an underestimate.

In 2015/16, Clearsprings reached a £213,580 settlement with HMRC after an inquiry into the group’s tax affairs. Lewis also called on the Home Office to be transparent about what led to the settlement, and whether it was taken into consideration “shortly [before] they awarded Clearsprings hundreds of millions of pounds of public money”.

A spokesman for HMRC said: “We cannot comment on identifiable individuals or businesses and we neither confirm nor deny investigations.”

Clearsprings declined to comment, while King did not respond when contacted.

A Home Office spokesperson said: “This contract was awarded under the previous administration. Contractors and their providers are closely monitored to ensure they are meeting the standards required.”

The new Home Secretary will set out the Labour government’s asylum accommodation policies in due course, the department added.

A version of this article was published with the Metro.