Wednesday, 21 October 2015

Offshore landownership in Scotland

Much as I often - let's be honest, nearly always! - disagree with seasoned land reform campaigner Andy Wightman's views, I'm grateful to his blog for making me engage with the topics he writes about.

For example, I'd never have got round to addressing myself to the Land Registration (Scotland) Act 2012 if it hadn't been for a post Andy wrote which made me think "Is that right? I should check it out" 

I also enjoy being able to comment on Andy's blog and engage with the other commenters there, one or two of whom have been highly influential on my thinking about land reform (and, no, I'm not talking about the Scottish Land & Estates people).

Anyway, this doesn't mean we're getting married or anything, Andy, and this post is simply to reproduce a comment I left on Andy's blog on the subject of whether the Land Reform Bill currently before the Scottish Parliament should be amended to introduce a ban on companies registered outside the EU being able to own land in Scotland:-

"The muddled thinking around this subject is extraordinary.

Ownership of land in tax havens is alleged to be responsible for tax avoidance, tax evasion, money laundering and “lack of traceability and accountability”. Let’s look at these in turn.

1) Tax avoidance. Title to land in Scotland is taken in the name of companies registered in tax havens for no more sinister reason than foreign owners wishing to avoid UK Inheritance Tax on the land. But forcing non-doms to re-register their land in another EU country (e.g. Sweden which doesn’t have IHT) doesn’t oblige them to pay UK IHT. So what’s the point?

2) Tax evasion. As pointed out when discussing Land Rental Value, you can’t hide land. So if HMRC believe an offshore landowning company is evading tax legally due, it can raise an estimated assessment. If the offshore doesn’t engage, after due process HMRC can sequestrate it. That means its land is sold to pay its tax bill. Being registered in a tax haven doesn’t give your Scottish assets immunity from debt recovery process.

3) Money laundering. No study or consultation has ever been done to see whether this is enough of an issue as regards Scottish land to merit unfocussed “cut off head to cure cold” measures like restricting ownership to EU companies. Should responses to money laundering not be co-ordinated with the law enforcement agencies? And is money laundering not reserved?

4) “Lack of traceability and accountability”. What does this actually mean? All the Land Reform Review Group said (page 35, para 3 [here]) is it’s a “particular topic that is raised” But there’s no analysis before the LRRG leaps to the conclusion that non-EU ownership should be banned merely because there’s no EU rule preventing it! The Scottish Government has responded that there’s no evidence that land owned by a company incorporated outside the EU has caused detriment to an individual or community. Whether that’s true or not, I don’t know but that’s the question that needs to be investigated before resorting to knee-jerk gesture politics of banning things just because you don’t like the sound of them.

Anyway, what are these much vaunted EU company laws under which it’s claimed “the directors are named and are legally responsible and accountable for the affairs of the company.”? [1] Is there an EU Company Law Directive to that effect and, if so, why has there been no analysis to see if it’s fit for the purpose trying to be achieved in Scotland. Whatever that is."

I'll just add that in my nearly 20 years as a rural property lawyer, it always amazed me that, despite the limitations of the Register of Sasines not being map based, land agents always seemed to know exactly who owned what and who to contact about it: this whole "lack of traceability and accountability" might be a concern up in the ivory towers but never seemed to be a problem in practice down on the farm!

Letterewe: registered in the Dutch Antilles but phone Barbara on 01445 760207 if there's anything you need to know
[1] Quote from Andy Wightman's evidence of the Land Registration Bill, page 5 - here

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