Scottish care homes owned by the Chinese state in tax havens

Dozens of Scotland’s care home buildings are owned by companies based in tax havens and controlled by global hedge funds, private equity and the Chinese government,  The Ferret can reveal.

Data obtained from Registers of Scotland shows that – as of the end of 2019 – at least 44 Scottish care homes were owned by companies based in tax havens such as Jersey, the Isle of Man and Gibraltar.

The ultimate owners of these care homes are hedge funds and investment companies from around the world including one which has the Chinese Ministry of Finance as a stakeholder.

These companies rent out buildings to care home operators. In some cases, the owners and operators are different parts of the same company. Some operators are also linked to tax havens.

Critics said our revelations show that the gradual privatisation of care homes since the 1980’s has “clearly failed”. They claim resources have been diverted from taxpayers, care home workers and residents, into the pockets of “cut throat capitalists”.

A lack of resources has been blamed for the high Covid-19 death rate in UK care homes. By June 28, National Records of Scotland’s latest data shows nearly half all the 4,155 Covid-19 deaths in Scotland have been in care homes.

The UK’s biggest care home provider is HC-One, which calls itself the “kind care company”. It is ultimately owned, via a Cayman Islands company, by private equity funds Formation Capital and Safanad Limited and a “social care turnaround company” called Court Cavendish.

Registers of Scotland data obtained shows that HC-One rents six of its care homes from HCP UK Investments (Jersey) Limited. These homes are in Linlithgow, Glasgow, Forfar, Dumbarton, plus two in Stirling

HCP is largely owned by the Chinese Ministry of Finance through the Cindat investment fund and China Cinda bank. A US-based property investor called Omega Healthcare also has a stake in the company.

As well as renting care homes from HCP, HC-One also rents 23 Scottish care homes from its own sister company, FC Skyfall IOM Properties Limited, which is registered in the Isle of Man. One of these homes is Home Farm on Skye, where ten residents have died.

Vivek Kotecha, research manager at the Centre for Health and Public Interest, said that most of the UK’s biggest for-profit care providers split their business so that one company provides care and another owns the building.

This is known as the ‘op co/prop co’ model which is also used by private equity in the retail and restaurant industries.

Kotecha said this model allows the building owning branch of the company to charge the care providing branch high rent. The care provider passes these costs on to their customers – the local authority or care home resident. This practice is perfectly legal.

Land registry records show that HC-One’s property company pays an independent company £76,500 a year to lease Redmill Nursing Home in West Lothian. The property company then sub-leases the building to HC-One’s care company for £293,000 a year.

Another problem, according to Kotecha, is that this system means the care provider has few assets. So, if a resident or their family sued the operating company for malpractice, the provider may not have much funds to pay any compensation.

The third problem, Kotecha explained, is that the property companies are often based in tax havens. “The flow of rental payments out to them can represent a loss of tax revenue in the UK and hinders transparency and accountability of the owners,” he said.

At other care homes, The Ferret has been unable to identify the ultimate owner. These include three homes in Banchory, Dumfries and Annan operated by a firm called Advinia Healthcare.

These are owned by a company called St Clair International, which is registered to a PO Box in Gibraltar.

Gibraltar is considered by Oxfam to be a tax haven and does not publicly reveal who owns its companies. When asked what its relationship with St Clair International is, Advinia did not respond.

Another 21 care homes across Scotland are owned by Jersey-based companies utimately-controlled by a US hedge fund called Davidson Kempner.

A spokesperson for Davidson Kempner said it had no relationship with the firms running these care homes and declined to comment when asked why it had structured its ownership of Scottish care homes through Jersey.

As well as care homes, a number of Scottish GP surgeries and dentists are also owned offshore. In 2018, a Jersey-registered company called StoneHealth Alpha bought several GP surgeries and a dental practice.

According to Jersey’s company records, Stonehealth Alpha is five percent owned by a London-based property consultant called Simon Harwood and 95 percent owned by a company called Stonehealth Properties.

Stonehealth Properties is jointly owned by four companies: Span Properties Holdings Limited (Mauritius), Luxembourg-based Barlux Investment Holdings, and Wag Properties Investments Limited and Tambura Limited, which are based in Jersey. The Ferret was unable to identify the ultimate owners of these companies.

Healthcare buildings owned by Stonehealth Alpha

Data correct at 31/12/2019. Source: Registers of Scotland.

In response, academics and campaigners said they showed that the privatisation of care homes had failed and that private equity companies were extracting much needed resources from care homes.

From the 1980’s onwards, the proportion of care home beds provided by the NHS, or local authorities, has been declining in the UK while the proportion provided by private companies has risen.

According to a recent CommonWeal report, some of these private companies were initially run by doctors and nurses looking for extra income or a career outside of the NHS.

However, the report also explains that some of these small businesses were later bought by big chains whose expertise lay in buying and developing land rather than providing healthcare.

Scottish Labour’s health spokesperson Monica Lennon said: “Scotland’s care homes conceal a shadowy world of billionaires, hedge fund operators and private equity firms yet they are staffed by some of the lowest paid workers in the country. A huge amount of public money goes through privately-owned care homes and we shouldn’t continue to put up with this secrecy.

Revealed: Scottish property worth billions owned by tax haven firms

A spokesperson for Unison Scotland said: “The current system has clearly failed. But having care homes being used to funnel public money to tax havens isn’t a case of market failure. The failure here is in having the market in the first place.

“The stealthy privatisation of social care has compromised safety, undermined training standards, driven down working conditions and caused a massive staff shortage,” the spokesperson added.

Dr Amy Horton, a lecturer in economic geography at University College London, said: “As governments have failed to take responsibility for social care, they’ve allowed risky and extractive business models to take hold among care homes.”

She added: “The evidence shows that these divert more money to debt, rent and offshore profits, at the expense of good quality care services and essential care workers – who are mostly women, and disproportionately BAME and migrants.”

When asked about potential solutions a ‘National Care Service’ was proposed by both Lennon and Unison.

First Minister Nicola Sturgeon recently said she had “huge sympathy” with such proposals, after SNP MSP Angela Constance raised the issue at Holyrood on June 2.

Lennon told The Ferret: “It’s encouraging that Nicola Sturgeon is warming to this. This is the political consensus that we need to build in Scotland. COVID-19 is making people realise that social care has been an afterthought for too long. It’s time to put the rights of older and disabled people before the profits of unaccountable owners.”

Lennon also called for greater transparency laws and tighter regulation. “At the very least it would force offshore companies back into the UK so that the public can see where the money goes,” she said.

Professor Bob Hudson from the University of Kent agreed that in the long-term, councils should provide care directly. But in the short-term, he said they should commission more from the small and not-for-profit care home providers which still make up 70 per cent of the market.

But Donald Macaskill, chief executive of Scottish Care, a body that represents the Independent care sector, recently told the Daily Record that setting up a National Care Service would “pose significant challenges, not only in its inception but also what type of care it would deliver.” He warned that a “one-size-fits-all” service may not give people the choices they want.

Aside from care homes, Register of Scotland data has shown that over £4.4bn worth of Scottish property is owned by offshore companies, many of them based in tax havens. Much of this property is in city centres like Glasgow or Edinburgh.

The Ferret also revealed that most of the Scottish Government’s private finance projects have links to tax havens. These projects are to build things like roads, schools and hospitals and much of the profits go out of Scotland.

A spokesperson for HC-One said: “HC-One’s financial structure and company results are well known and are regularly reported on in detail by the national media. We have made no shareholder dividend payments since 2017 and pay an asset management fee of just 1 per cent of revenue.”

“We own the majority of the homes we operate, and our debt is therefore modest in comparison to our assets. Moreover, HC-One is a committed UK taxpayer and all our income is subject to UK taxes.”

“HC-One’s priority is to deliver the kindest care, which is why in recent years we have invested in improving our homes, upgrading our equipment and developing an award-winning Colleague training programme. The benefits of these investments are clearly felt by our residents and their loved ones, who have rated us 9.5 / 10 on the independent comparison website, carehome.co.uk.”

Formation Capital, Court Cavendish, Safanad, Cindat, Omega Healthcare, Simon Harwood and China Cinda did not respond to a request for comment.

Care homes owned offshore

Property data correct as of 31/12/2019. Source: Registers of Scotland

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