UPDATE 1 November 2015
I have submitted a version of this blog as further evidence to the Rural Affairs, Climate Change and Environment Committee. This evidence also contains my opposition to the hypothecation of non-domestic rates for the Scottish Land Fund. 

After a fairly hectic summer, I now plan to publish more regular analysis of the Land Reform Bill as it makes it way through the Scottish Parliament. The Bill is currently at Stage One with the lead committee, the Rural Affairs, Climate Change and Environment Committee (RACCE) taking evidence. The Committee will produce a Stage One report before the end of the year which will then be debated in Parliament before going back to Committee for Stage Two for detailed scrutiny and consideration of amendments.

In this blog, I want to return to one of the contested areas of the Bill – the question of land registered in offshore tax havens.


In 2012, during the passage of the Land Registration (Scotland) Act 2015, I proposed that it be incompetent to register title to land in Scotland in the name of any legal person (company, trust etc.) that is not incorporated in member state of the EU (see written evidence).This was opposed by Fergus Ewing, the Minister responsible for the Land Registration Bill and was rejected by Scottish Ministers despite a recommendation by the Economy, Energy and Tourism Committee that “the Scottish Government should reflect further on options for ensuring that the land registration system reduces the scope for tax evasion, tax avoidance and the use of tax havens…” See here for comment.

In May 2014, the Land Reform Review Group made a similar recommendation that it be incompetent for any legal entity not registered within the EU to register title to land in the Land Register.

In December 2014, the Scottish Government launched a consultation on the measures to be included in the forthcoming Land Reform Bill. A proposal to restrict land registration to EU entities was included as proposal 2. In responses to the consultation, 79% of respondents agreed that such a measure should be adopted.

In June 2015, the Scottish Government published the Land Reform Bill. No measure to restrict non-EU entities was included and the explanation offered was unconvincing. (1) Instead, Sections 35 and 36 contain provisions that persons with a reason to do so may ask the Keeper of the Registers of Scotland to seek information about the beneficial ownership of companies. It is a meaningless provision since authorities in Jersey, British Virgin Islands and Grand Cayman are under no obligation to provide any answers.


Following a RACCE evidence session on 2 September 2015 with the civil servants responsible for the Bill, the Committee Chair, Rob Gibson MSP, wrote to Trudi Sharp, Deputy Director for Agriculture, Rural Development and Land Reform at the Scottish Government. In his letter, he sought answers to a series of questions including two relating to the EU/offshore provisions. The answers provide further insight into Scottish Government reasoning on why they decided not to proceed with the proposals and are explored below.

Question 2

Question 2 asked for

clarification of why the proposal in the consultation to make it incompetent for non-EU registered entities to register title to land in Scotland is not in the Bill and any analysis that the Scottish Government conducted in this area”.

In its response the Scottish Government provided 6 pages of argument (pages 24-29 in Annex B) which raised a number of issues.

EU still poses problems

Its principal reasoning is that landowners may, instead of incorporating offshore, simple incorporate within the EU but with an opaque shareholding structure involving (possibly) offshore companies. In other words, instead of Hanky Panky properties Ltd. in Grand Cayman, you would have Hanky Panky Properties Ltd. registered in Berlin but, in turn, owned by shareholders in Panama or somewhere. Even taking into account the new registers of beneficial ownership being developed by EU member states, the Scottish Government argue that these will not be fully open to the public and, in any case, do not apply to trusts.

This argument, in essence, suggests that because there remain means of concealing the true ownership of companies, nothing should be done.

But this is not logical.

Currently, we can know nothing about companies registered in tax havens. They have refused to co-operate with efforts to improve transparency. Any company registered in places such as Grand Cayman or the British Virgin Islands is surrounded by an impenetrable veil of secrecy.

A ban may well mean that alternative means of concealment are deployed within the EU. Even so, we will be in a better position that we were before the non-EU ban.

Firstly all such companies will be subject to registers of beneficial ownership. even though the may not be public available in the first instance, the trend is to move steadily to greater transparency and not less. In Scotland and the UK, we have direct influence in the EU and can argue and vote to improve matters. We have no influence over the internal affairs of tax havens.

Secondly, bringing such companies onshore so to speak, means we have access to information on Directors and shareholders as well as annual accounts and returns. Again, such information may be subject to a variety of regimes in terms of openness across the EU but all are better than offshore tax havens.

In other words, if the price of barring of the worst of secrecy jurisdictions is that we may still have residual problems with EU rules and regulations, that is no argument for doing nothing when we are in a position to improve matters within the EU.


The second key argument deployed by the Scottish Government is that barring non-EU entities might increase the use of Trusts as vehicles for owning land. Trusts (the argument goes) can be opaque and thus there is no point in doing anything about offshore entities. Again, this is illogical. Trusts are governed by Scots law and are within the jurisdiction of the Scottish Parliament. If there is a problem with Trusts (and there is), we can do something about it. Indeed, the Scottish Law Commission drafted a bill as recently as August 2014. The Scottish Parliament has unfettered competence to legislate to make Trusts more transparent.

Further Reasoning

The response to the RACCE concludes on page 29 with three further reasons why the proposal will not increase transparency and accountability of landownership in Scotland (1st, 3rd and 4th bullet points). The 3rd and 4th bullet points relate to the claim that there is no evidence that non-EU incorporation has ever caused any detriment to any individual or community. By contrast (it is claimed), there is plenty evidence of instances where UK registered entries have caused concerns. But the rational for the bar on non-EU entities has nothing to do with any alleged detriment. It is a proposal to improve transparency and, thus, accountability. This blog has highlighted a number of instances where such concerns may have a bearing on potential criminal proceedings (Kildrummy Estate here and North Glenbuchat Estate here). Beyond that, there are widespread generic concerns about money-laundering taxation.

But it is first bullet point that highlights how little serious thought has been given to this area of policy. Here is what the Scottish Government has to say.

“There is no clear evidence to suggest that having land owned by a company or legal entity incorporated in a Member State will increase transparency and accountability of land ownership in Scotland. To illustrate, the Tax Justice Network began publishing in 2013 a Financial Secrecy Index that ranks jurisdictions according to their secrecy and scale of their activities. The results from 2013 show that Luxembourg ranks second on the index, Germany eighth and Austria 18th. It is also worth noting that the United Kingdom ranks 21st (just behind the British Virgin Islands (20th) and somewhat higher than some of countries that are sometime perceived to be tax havens; Liechtenstein 33, Isle of Man 34, Turks and Caicos Islands 63).” 

The problem with this analysis (which seems to suggest that EU countries such as Germany and the UK are little different in terms of secrecy that the British Virgin Islands or the Turks and Caicos Islands) is that it relies on a composite index. As the Tax Justice Network explains,

The Financial Secrecy Index is a ranking of jurisdictions based on combining a qualitative measure (a secrecy score, based on 15 secrecy indicators) with a quantitative measure (the global weighting to give a sense of how large the offshore financial centre is). The secrecy score and the weighting are arithmetically combined with a special formula – the cube of a jurisdiction’s secrecy score is multiplied by the cube root of its global scale weight – to create the final score, which is then used for the FSI ranking.”

The secrecy score is base purely on the level of secrecy. The FSI ranking is derived by talking this secrecy ranking and weighting it by the volume of financial transactions that flow through each country. In other words, the most secretive jurisdiction in the world is Samoa. But because it is so small and handles very little financial flows, it ranks 76th out of 82 on the main FSI index. Germany, on the other hand is 58th out of 82 on the secrecy ranking but jumps to 8th place on the FSI index due to the sheer volume of financial flows through Frankfurt and other financial centres in Germany.

For the purposes of assessing the secrecy of any jurisdiction (the rational for barring non-EU entities), it is the secrecy ranking which matters and it is listed here.

The highest ranking EU member state is (not surprisingly) Luxembourg in 52nd place out of 82. Austria is at 52, Germany at 58, Cyprus at 65 and Latvia and other EU member states at 67 onward. In other words, EU member states are considerably more open that the virtually all other jurisdictions on the secrecy index. It is only the volume of transactions  that flow through London and Frankfurt that elevate Germany and the UK higher up in the FSI index.

Question 2

The second question RACCE asked was,

How much land the Scottish Government understands is held in tax havens, and whether it accepts the figure of 750,000 acres as reported by Private Eye magazine.”

The Scottish Government replied that it could not verify the accuracy of this figure because of the limited information available from the Register of Sasines and the fact that the term “tax haven” has no officially agreed definition. The latter statement is not strictly true as the OECD has identified a number of jurisdictions as tax havens

As for the limited information within the Register of Sasines, I have been interrogating this over the past 20 years. The jurisdiction within which any corporate entity is registered is always narrated in full on the title deed. This research led me to conclude in Table 15 in my book, “The Poor Had No Lawyers”, that 727,634 acres of land were owned by companies registered in offshore tax havens in 2012. Land sales since then has increased the total extent to over 740,000 acres.


The rational for not having included any provision for the restriction of legal persons owning land to those registered within the EU remains unconvincing. I understand from informal discussions, however, that there is no technical impediment to doing so. Any such amendment would involve amending Section 22 of the Land Registration etc. (Scotland) Act 2012 such that no deed would be accepted where the applicant was a legal person registered in any jurisdiction that was no at the time of recording a member state of the EU. In order to maintain such a condition, there would have to be provision for future action to be taken in circumstances where membership of the EU changes.

A further question remains in relation to retrospective application. Such a condition would require landowners who currently own land held by offshore entities to transfer ownership to a compliant entity. This could be done by requiring all existing owners registered outside the EU to transfer title to a compliant entity within, say, 5 years of a date to be set. (2)

I await further developments with interest.


(1) See Briefing 8 on Bill, pages 4-6 and my written evidence for further detail.

(2) See Briefing 7 on December consultation for further details.



  1. Richard Wakeford

    Just thinking about the Town and Country Planning Act 1947, there was a power to compulsorily purchase land which owners failed to develop in accordance with an approved local development plan. Would this sort of power help address the land of secret owners who fail to achieve the standards of sustainable development the Scottish Government might require?

    • I think those provisions were repealed in the 1960s. But it is an area of law that I giving quite bit of thought to in relation to what the Scottish Parliament might do in its next session.

      • I was thinking about planning as well Andy. In relation to something else, in relation to land use and landowners bleating on that they conserve the land best. So that if tenant farmers had a right to buy, it would quickly ruin the countryside, etc., etc.. But in Norway farmland is often conserved via planning. There is an old farm near where we stay that we feared might get built on after the last owner died. But my cousin told me it couldn’t be built on because it was down as farmland and it was illegal to build there, bacause of planning designation, and right enough, all the new building that is going on in our village is not on land that is suitable for farming, but on ridges and rocky outcrops and the like. The flat bits remain fields.

  2. Really useful discussion Andy, thanks.

    You’re spot on about the Financial Secrecy Index. For the purposes of understanding potential global harm, we combine secrecy with scale. For a specific analysis relating to e.g. individual transactions, the relative scale of the jurisdiction’s other transactions is neither here nor there – what matters, as you say, is the secrecy alone.

    We can often go further, by digging down into the components of the secrecy score. In this case, issues relating to e.g. bank secrecy, or judicial cooperation, are less relevant. You might want to focus on the indicators relating to beneficial ownership of companies, and of trusts and foundations – for example, by allowing registration in any jurisdiction where the beneficial ownership of the type of entity in question is a matter of public record.

    One advantage of this is that it could provide a more targeted measure than the EU-wide approach, which – in fairness to the Scottish government – would risk discriminating against non-EU states with equivalent transparency. Argentina recently lost a WTO case against Panama for a similar reason, because GATS (Article II) does not allow discriminatory approaches. And of course it would provide specific encouragement for others to follow the UK in establishing a public register of company beneficial ownership, and for all to pursue similar for trusts and foundations.

    An aside: the government is right to suggest that there is no good definition for tax havens – the problem with lists being that they don’t rely on objectively verifiable criteria, and hence are open to politically-motivated manipulation. This is one of the main reasons we prefer the concept of ‘secrecy jurisdictions’, which the FSI was set up to measure. Our paper on this: http://uncounted.org/2015/05/19/new-publication-the-financial-secrecy-index/

    • Any such proposal could not discriminate between EU member states – hence why it has to be pan-EU. Article 26 of the Treaty on the Functioning of the EU (TFEU) provides for the free movement of capital and Article 63 extends this to movement of capital between members states and third countries. Article 345 provides that The Treaties shall in no way prejudice the rules in Member States governing the system of property ownership.

      It is on this basis that such restrictions could work. Anyone can move capital into Scotland and can invest in land but land registration law will insist that if a corporate structure is to be used to take title to land, that it be registered within the EU.

      • It is the possibility of discrimination against non-EU states with equivalent transparency – not between EU member states – that concerns Alex, me (as I said at the Birnam Institute last year) and perhaps the Scottish Government.

      • Hmm. If it’s not possible to exclude any EU state, I guess the ‘most favoured nation’ issue would make it hard to exclude most others also. Maybe the way in has to be specific – e.g. to require public recording (in Scotland) of the ultimate beneficial ownership of the land, as well as the immediate owning entity and perhaps the chain of ownership structure (with some legal backing to require initial data and timely updates). This would make it worthless to use entities aimed at anonymity, since if their anonymity served other purposes they would be undone by this public recording.

        • Great article Andy.

          Alex – I would agree with you, the most effective way of ensuring the “natural person” (human beings or, group of people) who truly own and control the land is disclosed, is to require that at the point in which the land is registered on Scotland’s Land Register. This would be an additional amendment to what Andy already suggests above (Section 22 of the Land Registration etc. (Scotland) Act 2012).

          This isn’t entirely foolproof though – as firstly, the question of retrospective application (already mentioned above) would need to be dealt with, but secondly – if the beneficial ownership of the owner of the land (eg. significant shareholders) changed, then there would need to be some way found for updating this information in the Land Register.

          But – even with these questions remaining – with these measures included in the Bill we’d be in a much better situation in terms of really knowing who owns and controls land than currently is being proposed.

  3. Graeme McCormick

    The Land Registration Act could have included an obligation on a registered proprietor which is not a human person to be required to register any changes to the members of its board or trustees. Failure to do so could have allowed the Keeper to register a Notice of Non disclosure against the title attracting a cumulative fee based on the length of failure which would result in the Keeper declining to register a new proprietor until the fee is paid.

    • If a registered proprietor doesn’t tell the Keeper about any changes how would she know that there had been any?

  4. I have to ask why individuals who benefit from land owned in Scotland feel the need to go to the great lengths in hiding their identity through shell companies / tax havens etc ? Is it because (in the main) they want to hide their tax affairs from the Scottish Government. If that is the case, why should we allow these individuals to siphon any revenues / taxes due from their landholdings to these offshore companies where there would be no benefit to the Scottish people. I thought that the SNP were all for fairness , well if this land reform bill does not prohibit these people who benefit from their landholdings hiding their identities through offshore tax havens then I feel that the SNP calls for fairness a bit hollow.

    • I agree ! , Scotland must press ahead with land reform and counter tax evasion/money laundering measures – but on a global note, I would like to see tax havens abolished totally as they are just tools for fraud etc, I recall a few years back , Obama, leader of the most powerful nation in the west (I’m no fan of Obama by the way !) gave a speech condemning tax havens full of brass plate companies – and what has he done about it ? – Jack S**t, thats what !, instead he has just stood there whilst polishing his halo and pontificating over gun control and abolishing the 2nd amendment.
      This issue must get back on the public agenda, along with banking/financial industry reforms to prevent future crashes and parasitism.

      • it comes back to making sure regardless ownership and the provenance of the owner, that the full annual rental value of the land is assessed and collected, rather than try to obtain money from taxes on labour. They cannot hide the land in an offshore haven.

  5. Many thanks for your commentary on the progress of land reform bill. I am sure there are many folk like me new to the subject who are trying to get to grips with it all and your blog is a great help. Good to see punters voting for stronger proposals on this very detail at the SNP conference at the weekend.

  6. 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) 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.”? 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.

  7. Neil
    Tax avoidance ,is as far as I am aware, is not illegal so why do these land owners need to keep their identities hidden if this was the only reason.
    However tax evasion is illegal so what is to stop an offshore company selling land making a fat capital gain then disappearing. What about the revenues from windfarms going into their hidden coffers? The HMRC would not get very far if they cannot trace the owners of the company . To me the concern with offshore companies are they are almost a law unto themselves shrouded with secrecy and in my experience people that crave such secrecy are usually up to no good.
    In a more idealistic vane I feel that land should be owned by persons or companies who are resident in Scotland who would be subject to our laws and traditions and would be more likely to appreciate the history of the land and its communities, developing the land accordingly , than some offshore company whose owners probably have never visited the land they own and only see it as a way to make money.

    • Rod, you’ve made good points there which I will reply to by way of being devil’s advocate:-

      1. Tax avoidance. As you say, perfectly legal even if many people find it immoral. However, my point is I don’t believe the tax avoiders do hide their existence. Sheikh Maktoum makes no secret he is the beneficial owner of Kilillan, the Al-Tajirs of Blackford, Mohammed al Fayed of Balnagown, Lisbet Rausing of Corrour. Etc. Etc. Etc. Andy instances the land at Granton but I’d be surprised if the property industry (surveyors) don’t know who the contact for the owners is – if for no other reason, they’re there to make a profit on the land so it’s in their interests that it’s known who you make an offer for it to.

      2. Tax evasion. Your point about an offshore selling the land and sooking the dosh out to the Virgin Islands before HMRC knows what’s happened is spot on. (I was going to mention this in my post above but decided not to so as to keep it short and not too boring!) This could be addressed by a system they have in some countries (and I think we used to have in the UK with Estate Duty) which is that the state has a deemed charge over all land. What that means is a sale cannot be registered until HMRC has given a “clearance certificate” that the Capital Gains Tax has been paid. Of course, you can’t settle a complicated tax overnight so the way it works in practice is that the seller’s lawyers have to hand over X% (i.e. applicable rate of tax) of the price to HMRC in exchange for the clearance certificate to allow the sale to go through on the completion date. Then the seller has to negotiate any rebates etc. after the sale with HMRC negotiating from the position of strength that they’ve already got the dough.

      This is all a bit boring and technical but my central point is that, *if* tax evasion is the concern (is it?), then you should be looking at targeted solutions like that instead of blunderbuss “Tax haven bad, EU good” populist gesture politics.

      As regards your idealistic vein, well I’m all in favour of that except I suspect (a) it’s contrary to EU law; and (b) some people would argue we Scots, as the perpetrators of the Clearances (still continuing? Stoddart?), are in no position to pontificate about communities and traditions where land and law are concerned!

      But thank you for responding constructively to my post Rod. And thank you to Andy for hosting the debate.