THE saga of the purchase of Lowood Estate by Scottish Borders Council took an extraordinary twist yesterday when it was revealed that the local authority has paid nearly £10 million to two companies based in the tax-haven Cayman Islands.

Lowood, near Melrose, was reported to be owned by the Hamilton family but a Freedom of Information request has uncovered that the “owning entities” are Genesis Trust & Corporate Services Ltd and Lowood Estates Ltd, both based in the Cayman Islands where such companies currently pay no corporation tax.

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Tory-led Scottish Borders Council (SBC) had pleaded poverty before setting its budget earlier this year but was able to find £11m in total for what opponents have called “a speculative development” that could include up to 400 houses near the River Tweed.

The Cayman Islands connection came about because the estate is owned by two companies registered in the Caribbean tax haven. It was revealed that the money went to the Caymans after former councillor Andrew Farquhar asked for details of the deal.

The council refused to release the details at first, but Farquhar lodged a Freedom of Information (FOI) request. He and other critics of the deal have already pointed to the fact that the stated £9.6m purchase price disguised the real cost of the purchase.

The 109 acres – plus nine properties including a mansion house – are needed, says SBC, for housing and industrial development. When the seller’s legal fees, surveyors’ costs and land tax were added, the price soared to over £11m. The figure includes £780,000 to cover interest charges.

While there is no tax payable in the Cayman Islands, council taxpayers will have to fund £422,250 for UK Land & Buildings Transaction Tax and a possible £30,000 payment for VAT.

Farquhar told the Not Just Sheep and Rugby blog: “My reaction is that of a frustrated taxpayer whose money has been used for a questionable transaction which does not appear to be good value and is being directed to an offshore tax haven. It makes no sense to me. Why should we be taxed on what we earn to pay taxes to fund millionaires who are tax exiles?”

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One source with knowledge of the deal, speaking on condition of anonymity, said: “It was always going to come out that the owning entities are based in the Cayman Islands.

“What were council officials thinking when they recommended paying council taxpayers’ money to companies based in a tax haven?

“Did the Conservatives and their so-called independent pals know they were sending money to a tax haven? This is all scandalous.”

Stuart Bell, SNP group leader on SBC, said: “This is an unfortunate series of transactions. For a start I think it is unfortunate for the council to be paying the seller’s fees. I am also dissatisfied that the contract has resulted in council taxpayers’ money going to a tax haven.”

In its response to Farquhar’s FOI request, the council states: “Scottish Borders Council purchased Lowood Estate from Lowood Estates Limited, and Genesis Trust & Corporate Services Ltd, both companies incorporated in the Cayman Islands. The whole purchase price was paid to these companies.”