Rise and rise of an offshore man

Robert Winnett and Andrew Porter
JUST over seven years ago, in his second budget, Gordon Brown promised to clamp down on the “shadowy men in sunny places” promoting offshore tax avoidance schemes.

The new Labour government had just been hit by one of its first ministerial rows after it emerged that Geoffrey Robinson, the paymaster- general, had benefited from sheltering his money in a trust in Guernsey.

At the time it is unlikely Brown was familiar with the name Dr Paul Drayson. But he was just the sort of person he was hoping to deter from going offshore — a successful British businessman benefiting from the booming economy.

The year before, Drayson had made a fortune with the stockmarket flotation of PowderJect, a small pharmaceutical company he had set up with his wife and father-in-law.

Then, in January 1998, shortly before the budget, Drayson opened offshore companies on the Isle of Man, where businesses and their owners can pay virtually no tax on profits.

He set up two companies in Douglas, the island’s capital, to hold his and his family’s shares in PowderJect.

Over the next few years, more than £30m passed through the Draysons’ offshore trusts, called Ventana and Amalfi, and offshore companies, Vardale Limited and Sherdley Limited.

PowderJect’s company accounts detail how the Draysons were the benefactors of the trusts and companies that held millions of shares, largely tax-free. They also set up St Tropez Charters, which bought their yacht with money from the Isle of Man companies.

The family’s recent decision to bring its money back to the UK was neatly timed. Within months, Brown had closed the loophole and introduced a hefty tax penalty for people repatriating their fortune.

Drayson had been a staunch Labour supporter for several years. He was made a peer by Tony Blair after giving a series of generous donations to the party. Last week his position within the party was cemented when he was appointed junior defence minister.

Following inquiries by The Sunday Times, Drayson’s spokesman yesterday issued a statement that confirmed he had used offshore tax shelters until last year. The statement was also given to Labour-supporting Sunday newspapers in the hope of diluting the embarrassment for Drayson.

It said: “When Lord Drayson was an active businessman, some of his and his family’s financial interests were held in trusts offshore.

“Since entering public life, Lord Drayson took steps to ensure the trusts came onshore and would be taxed accordingly, with the full knowledge of the Inland Revenue. This move was completed last autumn.”

The Isle of Man regulatory authorities said last week that Drayson and his wife’s companies were liquidated on March 8 this year — the week before Brown introduced new laws to restrict British residents’ use of tax havens to avoid tax.

Timing has been a hallmark of Drayson’s career. He first came to public attention in 2002 after PowderJect won a £32m contract from the Department of Health to supply smallpox vaccines. It emerged Drayson had given two £50,000 donations to Labour, one during the procurement process for the vaccine.

Rise and rise of an offshore man - Sunday Times - Times Online