Senior Matheson figure set up Cyprus firm to reduce tax bill

A senior figure in Matheson solicitors set up a company in Cyprus as part of a structure to reduce his tax bill when moving to London to take over the running of the firm's office there, the Mossack Fonseca files show.

Stanley Watson "in effect" resigned from Matheson after moving from Dublin to take charge of the London office, according to documents in the leaked files.

He set up a structure so he could charge the firm for his work using a consultancy company that would pay most of its income in dividends to a company in Cyprus.

On November 27th, 2012, Mr Watson wrote on Matheson headed notepaper to Ernie Donne, of Central Corporate Services Ltd in the Isle of Man, saying that he was putting a proposed structure in place for himself based on his residence in the UK "where I have overall responsibility for our London office".

“I am a partner in this firm. In the course of 2011 I resigned as head of corporate finance in our Dublin office and took up overall responsibility for our London office and I would intend to be in situ here for the foreseeable future.”

Taxation issues had been considered by both PricewaterhouseCoopers and Deloittes and various proposals were being implemented, he said.

What was envisaged was that he would “in effect” resign as a partner and “proceed with my role in Matheson utilising a newly incorporated Irish private limited company... that will be in receipt of consultancy payments”.

The advice “we have received” indicated that it would be helpful if there was a Cypriot resident parent to the Irish limited company, Mr Watson wrote, “as no doubt you are aware there is a very attractive double taxation agreement between Ireland and Cyprus”.

Mr Watson noted that Mr Donne had known him and the firm for a considerable period of time and said he assumed that Mr Donne could provide any references needed. He had been a partner with the firm since 1993, he wrote.

“I suspect the turnover of the Irish company will be somewhere in the region of €500,000 to €1 million per annum which will probably be a similar quantum going through by way of dividend to the Cypriot entity. I can finalise the precise figures shortly.”

Shelf company

Mr Donne contacted Mossack Fonseca, which arranged for shelf company Giellea Re Co Limited to become a holding company that would be owned by Mr Watson and would in turn own his Irish company.

While Mr Watson said in his letter that he would proceed with his work in Matheson using a newly incorporated Irish company, “namely Millgate Properties Limited”, this company was in fact incorporated in 1996. It changed its named to Millgate Services and Investment Holdings Ltd in November 2012, two days after the date on Mr Watson’s letter, with the relevant document being filed with the Companies Office by Matheson.

It also around this time switched its register office from the Matheson offices on Sir John Rogerson’s Quay, Dublin, to an address in Mount Merrion.

In email correspondence with Mossack’s office in the Isle of Man in November 2012, when in the process of buying Giellea for Watson, Mr Donne said he had known the client for 20 years and said the matter concerned “our biggest client so I would appreciate it if you could pull out all the stops on this one please”.

In November 2012, when Mr Watson was sending a consent and indemnity letter to Mossack and others in Cyprus who were going to be in charge of running Giellea, the matter was dealt with on his behalf by a woman in Matheson’s offices on Sir John Rogerson Quay.

A request to speak with Matheson and Mr Watson about the matter met with no response.