This Wednesday the Rural Affairs, Climate Change and Environment Committee (RACCE) holds it first meeting to consider amendments to the Land Reform (Scotland) Bill at Stage 2. Once the Committee has completed Stage, its amended Bill will go forward to Stage 3 to be debated and further amended by a sitting of the whole Parliament.

This blog is a brief update on where we are with the one provision that has been the subject of much debate and where the RACCE themselves want the bill strengthened – namely the Part 3 provisions on transparency over who controls corporate entities that own land.

BRIEF HISTORY

Proposals to make it incompetent for non-EU companies to own land and to make declarations of beneficial ownership of companies mandatory in the Land Register were tabled during the passage of the Land Registration (Scotland) Act 2012 but were rejected by the Scottish Government.

– The Land Reform Review Group recommended that such a measure be adopted to improve transparency in the ownership of land.

– The Land Reform Bill consultation in December 2014 sought views on the proposal and it was widely endorsed by consultees.

– The Land Reform Bill was published in June 2015 but did not contain provision for such a bar. Instead, it contained a mechanism whereby questions could be asked about the beneficial ownership of companies in tax havens and elsewhere but there is no obligation on such jurisdictions to co-operate.

– The RACCE Committee took evidence on the Bill and, in its Stage One report, recommended that the original proposal be introduced to the Bill.

– Scottish Ministers responded to the Stage One report by, once again, rejecting the non-EU proposal on the grounds (they argue) that it is outwith the competence of the Scottish Parliament.

– Scottish Ministers then last week announced that they would be tabling an amendment at Stage 3 [link to letter] that would create a public register of person who exert control of companies that one land. The amendment would merely be a regulation making power with the details of how such a register would operate being left to the next Parliament to draft and enact.

AMENDMENTS

We now have three distinct proposals for the way ahead with regard to transparency – two amendments to be considered this Wednesday (see full text here) and one amendment to be tabled at Stage 3.

Graeme Dey (SNP) Amendments 29, 30 and 36

The first is a series of amendments in the name of Graeme Dey MSP (numbers. 29, 30 and 36) to the Bill that would require the beneficial owner or “controlling interest” in any corporate entity (not just non-EU ones) to declare their identity in a new section of the Land Register (Amendments 29 and 36 merely remove existing Sections 35 and 36. Amendment 30 is the substantive amendment). This is not a bar to non-EU entities but is a disclosure provision to be incorporated in the Land Register. Verification of the identity of the beneficial owner will still be tricky but appropriate penalties can act as a deterrent. This amendment has ben developed following considerable effort by Megan McInnes of Global Witness and Peter Peacock of Community land Scotland.

Patrick Harvie MSP (Scottish Green Party) Amendments 105 and 106

Patrick Harvie has tabled an amendment (Nos. 105 & 106) that reinstate the bar to non-EU corporate entities and fulfils the original recommendations of the Land Reform Review Group,  the December 2014 consultation paper and the  RACCE Stage one Report. Whilst some EU disclosure requirements are not fully transparent, bringing corporate entities “onshore” exposes them to the ongoing work across the EU to improve transparency through a variety of processes such as the requirements of the Fourth Anti-Money Laundering Directive that requires member states to establish registers of beneficial ownership of companies.

The Scottish Government Amendment

The Scottish Ministers will table an amendment at Stage 3 to replace Sections 35 and 36 and introduce a new regulation making power for Ministers to establish a “Register of Controlling Interests in Land”. The details of this register, what it would contain, how it would operate and how compliance would be enforced would then be the subject of secondary legislation to be introduced in the next Parliament. It is thus hard to know what is involved with this proposal and there will be no time for any debate as it will be introduced at Stage 3. Critically, it is not clear whether Ministers are proposing yet another Register or whether they are open to the idea within Graeme Dey’s amendments to make such disclosure part of the Land Register and thus visible on the title to ownership of the land.

I hope that RACCE will support both Graeme Dey and Patrick Harvie’s amendments. They provide a “double lock” arrangement whereby tax havens are outlawed as jurisdictions within which land and property in Scotland can be owned AND those entities registered within the EU are obliged to publish details of the controlling interests on the face of Land Register titles.

If you wish to support these amendments, contact any member(s) of RACCE and tell them you support amendments 29, 30, 30, 105 and 106. Contact details are here.

12 Comments

  1. If you’ve achieved disclosure of beneficial interests (whether under the Dey or SG amendments), then why do you need to ban non-EU corporates as well?

    Question for Andy – if you had to choose between a register of beneficial interest or banning non-EU corporates, which would you choose and why?

  2. The benefit to the man/woman on the street of the disclosure of beneficial interests?

  3. As residents of Scotland we must know as a matter of common sense (let alone the tax authorities knowing ) who owns what land. and the sooner the better. For the SG to propose their amendments without providing the indformation to support their proposed means of compliance is beyond stupidity and stinks of compremise. I see the purveyers of the straw man argument and the ‘ too poor stupid etc have aleady commented as scheduled.

  4. The arguments about registration and transparency in ownership of landed wealth are the same as those arguments made regarding financial wealth. The fiscal contract is broken if some are able to evade paying their fair share or ignore the community burdens their land use creats ( viz environmental degradation). While the cost of tax havens whose sole purpose is to hide beneficial ownership of financial wealth is known to be very high (hundreds of millions in annual losses in tax revenue to HRMC), the cost of ‘land havens’ remains speculative making informed debate difficult and ‘after the damage has been done’. An excellent treatment of the tax effects of opacity in beneficial ownership of financial wealth with innovative estimates of current tax losses, see Zucman, G. (2015) The Hidden Wealth of Nations, Univ of Chicago Press

  5. Does Patrick Harvie’s proposed bar to “non-EU” corporate entities owning Scottish land propose to allow only entities registered in full EU member states or in all countries that are associated with the EU in some way, such as through the EEA or other agreements (eg Iceland, Norway and Switzerland)?

  6. Allowing secrecy for land registration is as insane as allowing secrecy for vehicle registration.

    How then is anyone to know that you’re insured or taxed or licenced?

    Its blatant stupidity.

    The only reason to continue the current regime is that someone somewhere is getting a bung to make sure it stays that way.

  7. I’ like to see a prosal which delayed the legal sale until the buyer is legally recognised in person or by company
    and domain and by tax status in this country.

    • what about the Seller who would be then delayed in getting the price for the sale of their eg house / hotel/ farm etc ?

  8. I dont see any real right to buy with teeth yet.
    Thats the only measure that will put the lairds back in their box.

  9. Tax revolt anyone ? – it seems to be good enough for “opaque” estate ownership – so maybe its good enough for us proles too ! ; http://www.independent.co.uk/arts-entertainment/tv/reviews/the-town-that-took-on-the-taxman-tv-review-rebellious-business-owners-get-a-crash-course-in-tax-a6814871.html