The Mirror carries a report today (13 April 2013) that the house that Margaret Thatcher lived in for the past 20 years is “owned” by a company called Bakeland Property Company Ltd. registered in the British Virgin Islands. The story is a little confusing and conflates ownership with leasehold. The fact that the house is owned offshore was first reported by Rob Evans and David Hencke in the Guardian in 2002.

In England and Wales, land is owned on a system of Freehold and Leasehold whereby Party A may be the Freeholder but may grant a lease to Party B (the leaseholder) of, for example 100 years. The property is thus “owned” by both parties simultaneously. In the case of 73 Chester Square (pictured above on Google Streetview) there are actually three parties with an interest in the property. (1)

1. The Freehold is owned by the Trustees of the Will of the Most Noble The 2nd Duke of Westminster.

2. There is a lease (Title NGL534189) for 200 years from 25 March 1984 of No.73 Chester Square and other land in favour of Grosvenor Estate Belgravia, 70 Grosvenor Street, London, Company No. 01138134.

3. There is a sub-lease (Title NGL688804) from Grosvenor Estate Belgravia to Bakeland Property Company Ltd. from 18 October to 25 December 2030 and a further sub-lease (Title NGL740241) from Grosvenor Estate Belgravia to Bakeland Property Company Limited for 59 years and 167 days from 12 July 1996 to 26 November 2055. (2)

Bakeland Property Company Limited is a company incorporated in the British Virgin Islands with its Registered Office at Essanestrasse 91, Po Box 341, L1-9492, Eschen, Liechtenstein and c/o Collyer-Bristow, 4 Bedford Row, London WC1R 4DF.

Assuming that the leasehold interest was held by Bakeland Property Company Limited on behalf of the late Mrs Thatcher (who thus had a proprietorial interest in the house as opposed to simply being a tenant and having no connection with Bakeland), that the beneficial interest is inherited by her children Mark and Carol, and that, as the Mirror claims, the house is currently worth £6 million, then both inheritance tax at 40% (£2.4 million) as well as Stamp Duty Land Tax at 7% on any subsequent sale (£420,000) will be avoided.

The new Stamp Duty Land Tax rate for residential properties owned by corporate bodies of 15% only applies to properties acquired since 21 March 2012 and will not apply where the legal title remains in the same name and only the beneficial ownership of an offshore trust or company changes.(3) It may well be the case that Bakeland is owned by trusts whose beneficiaries are people other that the late Mrs Thatcher but because offshore companies are usually run by nominee Directors and owned by at least one offshore trust, the identification of the precise beneficial interest is extremely difficult.

And that is one of the legacies of Mrs Thatcher’s property-owning democracy. (4)

 

(1) There are 4 parties if you include the fact that Freeholders are not absolute owners but hold their land from the Monarch who is the only person capable of owning land “absolutely” in England and Wales as this entertaining exchange of emails with the Land Registry demonstrates.

(2) Thanks to @MrsTrevithick for alerting me to fact that Bakeland was, until 1996 registered in Jersey. This explains why there are two leasehold titles in the name of the same company – actually two different companies with the same name.

(3) See Treasury Consultation “Ensuring the fair taxation of residential property transactions” for details of proposed changes in the taxation of residential property owned by non-natural persons (e.g. offshore companies).

(4) In searching for the titles to 72 Chester Square I mistakenly typed 73 and obtained the title of No. 73 next door (Title NGL889003). It is owned by 72 Chester Square Limited incorporated in Liberia.

 

The Guardian are running a series of investigative articles on the use of offshore tax havens to acquire land & property in London. It was timely, therefore to see Steven Vaas’s article in the Herald on Monday which revealed that seven parcels of land at Granton Harbour and Western Harbour – part of the Waterfront development – in Edinburgh have been sold to a company called Sapphire Land Ltd., PO Box 957, Offshore Incorporations Centre, Road Town, Tortola, BRITiSH VIRGIN ISLANDS.

One parcel alone, (pictured below) was bought by FM Homes Ltd in January 2008 for £3,075,000 and sold to Sapphire for £327,916 in August 2012.

This sale of land adds to a growing list of land and property in Edinburgh and across Scotland including much of Charlotte Square which is now owned by companies operating out of offshore tax havens.

I argued during the passage of the Land Registration (Scotland) Bill that we need to make sure that there is transparency in landownership. The simple legal answer is that there is. After all, I have just consulted the Registers of Scotland and note that this land is owned by Sapphire Land Ltd. – what more do I need to know? But this analysis goes to the heart of the debate over the Bill which was regarded as merely a legalistic reform by the Scottish Government and arguments from myself and others that it should be seen as part of a wider public land information system were rejected by Ministers.

In my 4th blog on the Bill (click on “Land Registration” category on right side for all of them), I cited the growing evidence that registering land in tax havens frustrates the administration of the criminal law, the collection of taxes, and good governance by concealing the true beneficial owners of land. Specifically, my proposal for transparency on offshore landownership was rejected (despite having been called for by the SNP when in opposition). My written evidence is here.

There are now over 750,000 acres of land in Scotland owned by companies in offshore tax havens. We know nothing about who is behind these companies and they are probably avoiding a lot of tax. Why, oh why does the Scottish Parliament not feel able to do the simple things it can to make Scotland a fairer and more equitable society? What possible public benefit can there be in allowing the public registration of land in the name of companies located in tax havens?

Anyone?

Today, the Scottish Government announced the establishment of a “Land Reform Review Group” that will oversee a “wide ranging review of land reform in Scotland”. If this happens it will be very worthwhile.

However, the remit and membership of this group are yet to be agreed with Scottish Ministers and it is unclear how wide the remit will be. If it is simply to undertake a technical review of the Land Reform (Scotland) Act 2003, it will be of very limited value when the real issues concern inflated land values, affordability of housing, succession law, tax avoidance, secrecy, absentee landlordism, theft of common land, land registration laws, common good etc. etc. etc.

Whether any of this gets looked at depends on two things.

The definition of the term “land reform” and the remit for the group. Let’s crowdsource ideas on both of these. Please leave comments on:-

1. a definition of land reform and

2. a remit for the Land Reform Review Group.

I will moderate comments strictly to these two questions.

My interview on Radio Scotland Newsdrive at 1750 today 24 July 2012.

UPDATE 25 July 2012 Rob Gibson MSP has issued a press release welcoming the establishment of the Group. From his comments it appears that the review will focus on community land issues. The “Overview of Evidence on Land Reform in Scotland” published by the Scottish government also restricts itself to the Land Reform (Scotland) Act 2003. Given too that a review of the Act was the focus of the SNP manifesto commitment, this all suggests that the remit of the Review group is not going to be a review of land reform but a review of one piece of legislation. Since the remit has yet to be published, however, it is still impossible to be sure.

UPDATE 27 JULY 2012 Professor Peter Dale OBE who is a past President of the International Federation of Surveyors 1995-99 and currently their Honorary President has contributed a useful summary of what land reform means. It is an analysis that I agree with. In my view land reform is about the reform of power relations and how that power is derived, distributed and exercised form the core of any serious land reform project. Here is what Peter has to say.

“The words ‘land reform’ often mean almost whatever you want them to mean and depend on to whom you are talking.

Unless I have missed it, the Land Reform (Scotland) Act 2003 does not define the term, it merely lists those examples of land reform that the Act addresses. It is as if you had a Health Reform Bill that didn’t address health, only some service delivery such as patient waiting times.

Land is a diverse concept that depends on whether you are looking at it from a legal, financial, land use or social perspective i.e. its ownership, value or use. Reform may concern the changing of land rights (land tenure reform), the redistribution of ownership or use rights (including land consolidation and land reallocation, i.e. reforms to the pattern of ownership), alterations to land use (e.g. physical changes in agricultural practice or through inner city development), changes to land tax (that bring about changes in land ownership, value or use), or changes in how land is managed, etc.

In summary, the term ‘land reform’ embraces all those processes that alter the pattern of land ownership, land rights, land values or land use within a specified area.

Professor Peter Dale 26 July 2012