A secret briefing prepared for Margaret Thatcher in November 1984 claimed a Northern Irish finance house got into serious financial difficulties - imperilling a Protestant church’s investment of over half-a-million pounds - by attempting to set up an off-shore operation as a vehicle for tax evasion.
The potential collapse of NIIB in late 1984 threatened a range of depositors including the Congregational Church, which had £690k tied up in it. Newly-declassified documents show that civil servants provided clear lines for the Prime Minister to take if she was asked about the local institution, given the Bank of England’s intention of revoking its licence.
“NIIB has gotten into difficulty because it has mismanaged its tax affairs, essentially by attempting to set up an off-shore operation as a vehicle for tax evasion by Northern Ireland residents and then failing to establish the bona fides of the Isle of Man end of the operation,” the note states.
A further briefing pointed out how the taxman had ruled that NIIB was liable to tax on deposits it had believed were tax-free. By November 1984, £1.7m was due and a further £1.5m was due in 1984/85.
But, as the document states: “NIIB does not have the capital and reserves to meet these liabilities. It is therefore insolvent.”
The Bank of Ireland, which would ultimately acquire NIIB, said in November 1984, it would take over the institution if the Inland Revenue waived the £3.2m tax liability and if it dropped its demand for a list of off-shore depositors. The Inland Revenue, however, refused to drop the demand for the depositors’ list.
Downing Street was concerned about the “unpleasant consequences” should NIIB have collapsed.
“Smaller depositors up to £10,000 will receive up to 75 per cent from the Deposit Protection Fund. Larger depositors may get only about 45 to 65 per cent. Regrettably, amongst these is the Congregational Church who have £690,000 at risk.
“This represents money accumulated to replace a church which was burned down,” the note states.