Following my previous blog on the offshore interests of the Scott/Buccleuch family, the Panama Papers have emerged. I look forward to interrogating the 2.6 terabytes of data once it is made available for public examination in early May.
Meanwhile, I thought I should publish information sent to me by the Chief Executive of Buccleuch Group on 16 March in response to my blog and coverage of the story by Commonspace and The National.
“In view of media reports and comment on regarding Pentland Ltd., a wholly-owned subsidiary of Buccleuch Estates Ltd., and the Stage 3 debate on the Land Reform (Scotland) Bill tomorrow, Buccleuch wishes to clarify the position of this company.
1. Pentland Ltd is a UK trading company which is subject to UK taxation. All tax that has been due from Pentland Ltd has been paid in the UK throughout the existence of the company.
2. All directors of Pentland Ltd are UK residents and UK taxpayers and are members of the Buccleuch family.
3. The ‘beneficial’ owners of Pentland have never been concealed and any land holdings owned by the company have been clearly identifiable as ‘Buccleuch’ land holdings.
4. Pentland was originally registered in the Cayman Islands in the 1970s, not for taxation purposes but to accommodate a range of international assets and investments.
5. Since the late 1990s, the assets of Pentland Ltd have been wound down and the company has traded exclusively in the UK. It is not permissible to re-register the company which currently owns a small property development in Canonbie, Dumfries and Galloway.”
This is a very interesting statement and reveals the sophistry at the heart of discussions about the use of secrecy jurisdictions.
Take the first sentence, for example.
Pentland Ltd. is a company registered at HSBC International Trustee Ltd., PO Box 484GT, Grand Cayman, Cayman Islands.
That is a fact.
This cannot be spun as “Pentland Ltd is a UK trading company”
Two other observations are worth making.
The statement suggests that Pentland Ltd. has had an association with the Buccleuch family since the 1970s and point 4 explicitly claims that Pentland Ltd. was originally registered in the Cayman Islands in the 1970s. In fact, Pentland Ltd. was not incorporated until 1990 as evidenced by its incorporation certificate here. So what was going on between the 1970s and 1990?
There is also some confusion about the relationship between Peatland Ltd. and Buccleuch. In this media statement from 2009, it is stated that “Pentland Ltd is a company under the ownership of the Buccleuch Group” when in fact it did not become a wholly owned subsidiary until 2013. Indeed in 2002, Anderson Strathern had written to the Keeper of the Registers of Scotland in plain terms that “Pentland Ltd is registered in the Cayman Islands and is not part of the Buccleuch Group.” From the statement above, it would appear tat it has always been part of the Buccleuch Group.
Finally..
We know nothing more about Hayes One Ltd., Clifton House, 75 Fort Street, PO Box 1350, Grand Cayman, KY1-1108, Cayman Islands.
And we still do not know who is the beneficial owner of of Buccleuch Estates Ltd.and how this is structured.
Mr Richard Scott (sometimes referred to as the Duke of Buccleuch) is frequently cited as the owner of the largest extent of private land in the United Kingdom. Yet, this has never been entirely accurate. The 242,000 acres of land in Scotland is owned not by Mr Scott, but mainly by a company called Buccleuch Estates Ltd.
Anderson Strathern Nominees Ltd. is a dormant company which is wholly owned by Anderson Strathern Asset Management Ltd. Anderson Strathern Asset Management Ltd. is wholly owned by Anderson Strathern LLP which, in turn is owned by the 53 partners in the law firm.
MS Estates Ltd. is wholly owned by Anderson Strathern Nominees Ltd. though the Directors include Mr Scott and other family members
Anderson Strathern Nominees Ltd. is ….. (but you know this).
So the ultimate owner of Buccluech Estates Ltd are 53 solicitors?
Well, not quite. Because what the Nominees do is to act on behalf of persons unknown on their behalf. These persons are likely to be members of the Scott family but we can’t know because the arrangements are not made public.
The first inkling I ever got that there was something odd about Buccleuch’s arrangements was 20 years ago in 1995. I was helping Philip Beresford compile the Sunday Times Rich List and he faxed me a copy of a letter he had received from Richard Scott’s father.
Dear Sir,
Much as I would like to be No. 33 in your chart of the richest 500, I fear I am there under false pretences.
As you rightly mention the calculation is based upon a hypothetical valuation of works of art. What you may not realise is that if I were to sell items in the collection, 80% of the proceeds would go straight to the Treasury. This is because 80% was the rate applicable to my father’s estate when he died in 1973.
My worth on that score should therefore be reduced from £200m to £40m and as I own no shares in Buccleuch Estates Ltd., I might find myself level-pegging with Gordon Baxter and Sean Connery.
Can you please take this into account next time?
In recent years the top rate of inheritance tax was reduced to 40% but even this would affect the positioning of many others whose worth is based upon art collections.
Yours faithfully
Buccleuch
Two things stood out in this letter which would later become of interest. Buccleuch’s art works were the subject of a heritage tax exemption (meaning that the public could have access at certain times in exchange for a deferral of inheritance tax) and that Buccleuch, despite being regarded as the owner of Buccleuch Estates, admits that he owned no shares in the company.
A few years later and at his request, I had a private meeting with a senior adviser to Buccleuch. In exchange for some intelligence he wanted on the likely impact of land reform, I requested information on who really owns Buccleuch Estates. I was told that it was controlled “by the family”, that there were “firewalls” between different parts of the business and that there were “offshore interests”.
Madonna of the Yarnwinder
Some years passed and my file on the topic lay dormant until in 2003 when the Leonardo da Vinci painting, the Madonna of the Yarnwinder was stolen from Drumlanrig Castle. Given the 80% inheritance liability that was due, I wondered what would happen in the event that the painting was never recovered. In 2007, the painting was recovered and is now on loan to the National Galleries of Scotland.
One thing that did happen was that the ownership of the painting changed hands shortly after the theft and was transferred to a charity, The Buccleuch Heritage Trust by a Deed of Gift on 16 April 2004.
The Buccleuch Heritage Trust transferred a total of £12 million of assets to a new charity, The Buccleuch Living Heritage Trust in 2011. The charity’s membership and Board is appointed exclusively by Mr Scott. The assets included Dalkeith House (which was not included in the valuation of £12 million) and title to the Madonna of the Yarnwinder.
The accounts of the Buccleuch Heritage Trust are no longer in the public domain. I asked Anderson Strathern for copies of the 2004 accounts but they demanded a fee of £100 which I could not afford and which I refused to pay. In the 2011 accounts of The Buccleuch Living Heritage Trust (2Mb pdf), there is a loan noted in the accounts for £749,692 that had been assigned from the Buccleuch Heritage Trust to finance the purchase of the Leonardo da Vinci painting (page 17). To understand this loan, we need to go back to the original theft of the painting.
In August 2003 the stolen painting was insured by John Scott for a figure of slightly less than £4 million. This seems to have been because, as outlined in Buccleuch’s letter in 1995, there was an 80% tax liability on the painting and that part of the value was never insured. Following the robbery, the insurers settled an insurance claim by Mr Scott of approximately £3.8 million. That settlement gave the insurers a right of ownership in the stolen painting. Around the same time the insurance policy in respect of the stolen painting was varied to enable the Buccleuch family to buy back the insurers’ right of ownership in the stolen painting, in the event that it was ever recovered.
My understanding is that the £749,692 that was loaned to the Trust in around 2004 was to enable this buy back agreement. The loan was fully paid off in 2012.
Pentland Ltd.
The loan to the trust was from a company called Pentland Ltd and the 2011 accounts note that Richard Scott, who is a Trustee of the charity, is also a Director of Pentland Ltd.
And so to the substance of this blog. Who is Pentland Ltd.?
There is only one company called Pentland Ltd. registered in the UK and it is a wholly-owned subsidiary of Galliford Try, a UK construction company that has nothing to do with the Scott family.
The Pentland Ltd. that loaned £749,692 to acquire the da Vinci painting is a company registered in Grand Cayman, part of the Cayman Islands, a British Overseas Territory and notorious secrecy jurisdiction. Its registered office is ar HSBC International Trustee Ltd., PO Box 484GT, Grand Cayman, Cayman Islands.
Until recently, Pentland Ltd. had no direct links to the Buccleuch Group (the very complex network of companies controlled by Buccleuch Estates Ltd.). Instead it was part of a quite separate (and just as complex) network of companies controlled by the Scott family. Pentland was incorporated in Grand Cayman in 1990. By 2009, it had become a subsidiary of Dabton Investments Ltd. and in 2013, Dabton was acquired by Tarras Park Properties Ltd., a subsidiary of Buccleuch Estates Ltd.
Pentland Ltd. (Grand Cayman), Salters Land Ltd (British Virgin Islands) and Drumcork Ltd. (British Virgin Islands) are now all subsidiary undertakings, joint ventures and associates of Tarras Park Properties Ltd. which is wholly owned by Buccleuch Estates Ltd.
An investigation into the myriad companies associated with Pentland prior to 2013 reveals a series of loans from Pentland Ltd. to other companies in the Buccleuch Group. Some of these loans were repaid in full or in part and others were written off in full or part. Some details are provided in this dossier.
Lending money to UK companies from companies registered in secrecy jurisdictions is one method of bringing offshore money onshore. Writing off such loans means that the money is never repaid.
Being 100% owned by the Buccleuch Group, loans and other related party transactions are now exempt from disclosure under Financial Reporting Standard 8 on Related Party Disclosures. It is thus no longer possible to identify the loans being made by Pentland Ltd. to other companies in the Buccleuch Group.
Given that Buccleuch Estate Ltd. is itself ultimately owned by a nominee company of solicitors, is Pentland Ltd. one of the offshore family trusts I was told about in the late 1990s?
Dalkeith Estate
Dalkeith Country Park is popularly assumed to be owned by Buccleuch Estates Ltd. But as we have already seen Dalkeith House and surrounding grounds are owned by The Buccleuch Living Heritage Trust.
The ownership of the majority of the rest of the Country Park and neighbouring land was revealed in correspondence entered into between Buccleuch Group, Anderson Strathern and the Registers of Scotland in relation to the registration of an agricultural tenant’s interest to buy their farm under Part 2 of the Agricultural Holdings (Scotland) Act 2003.
The eastern part of the Country Park is occupied by a tenant of the Home Farm and a further agricultural tenancy exists over Smeaton Farm on the Park’s eastern border, just outside the park
Half of Smeaton Farm was owned in the past by Pentland Ltd. but by 2012, it had transferred its ownership to a company called Hayes One Ltd., Clifton House, 75 Fort Street, PO Box 1350, Grand Cayman, KY1-1108, Cayman Islands.
In correspondence relating to the Home Farm and Smeaton Farm in 2007, Registers of Scotland asked Buccleuch whether Pentland Ltd and Buccleuch Estates Ltd. “were connected in any way for example with the same beneficial share ownership and whether the tenant did receive notification of the change of ownership and when this took place.”
In reply, Anderson Strathern wrote to RoS to state that ownership of the Home Farm had transferred from Pentland Ltd to Buccleuch Estates Ltd. on 26 November 2002 and this information had not been intimated to the tenant. The letter said nothing about beneficial ownership, merely that “Pentland Ltd is registered in the Cayman Islands and is not part of the Buccleuch Group.”
A search in the Register of Sasines and Land Register for “Pentland Ltd.” in Midlothian returned no results.
In an article in the Sunday Times on 21 July 2013, John Glen, Chief Executive of Buccleuch Estates Ltd. said,
“It’s my job to run the Buccleuch companies and I can assure anyone that Buccleuch businesses pay tax where they fall due. All trusts linked with Buccleuch are subject to UK tax and all other family-related trusts are resident in the UK and subject to UK tax.”
It is not clear whether this statement covers the activities of Pentland Ltd., Salters Land Ltd., Drumcork Ltd. and One Hayes Ltd.
In a statement issued yesterday, a spokesman for Buccleuch said:
“Pentland Limited is a Cayman Islands incorporated vehicle which is wholly owned by The Buccleuch Estates Limited which is UK registered. The company has always been wholly owned by Buccleuch and members of the Buccleuch family, all of whom are UK resident taxpayers.
“All profits arising in Pentland Limited are subject to UK corporation tax. Pentland Limited has historically owned land in the UK and currently owns an area of land near Canonbie in Dumfries and Galloway.”
In the Land Reform (Scotland) Bill debate on Wednesday this week, Patrick Harvie MSP has tabled two amendments that would bar all legal entities registered in British Overseas Territories or Crown Dependencies from registering title to land in Scotland (Amendments 105 & 106 pages 11 & 12).
This is merely the latest in a long series of attempts in Parliament to crack down on offshore ownership. At First Minister’s Questions on 9 October 2003, Jack McConnell responded to a question from Stewart Stevenson MSP on the topic and concluded that “I am sure that the matter will be discussed in Parliament over a long period.
In 2012, in response to further attempts to amend the Land Registration (Scotland) Bill in 2012, Fergus Ewing MSP, responded to concerns raised by the Economy, Energy and Tourism Committee, by saying that nothing could or would be done. In a meeting with the Minister at the time, I specifically raised the question of the use of secrecy jurisdictions by landowners like Buccleuch. Barely able to disguise his contempt for me, he said that he had visited Buccleuch and that the company had created lots of jobs. On Wednesday, Parliament will once again debate the matter after months of pressure from campaigners for greater openness.
Meanwhile, despite what we have discovered here, we are no closer to being able to determine for sure the real owner of Buccleuch Estates Ltd.
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.
– 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.
Yesterday the Scottish Government announced that their solution to the problem of not knowing who is behind the opaque corporate structures owning Scotland’s land was to create a public register of those who control land, (media release here and letter to RACCE here) as part of the Land Reform (Scotland) Bill currently passing through parliament. This step should be broadly welcomed and is a significant step forward from the previous proposals in the Bill to improve transparency of Scottish land ownership.
On paper this announcement appears close to the improvements to transparency of land ownership which I blogged about two weeks ago, but is it really as good as it sounds?
No-one disputes that not knowing who is really behind major swathes of land in Scotland is a problem. It prevents local communities living on or affected by land from contacting the true owner if they have a problem (rather than an anonymous shell company), it prevents law enforcement agencies from investigating crimes and it’s ironic that having won the right to roam, Scotland’s citizens don’t have the right to know who truly controls and makes decisions about the land they are walking on.
In a letter accompanying the Government’s announcement, Minister for Environment, Climate Change and Land Reform, Aileen McLeod MSP, describes their intention to “requir[e] the public disclosure of information about persons who make decisions about the use of land in Scotland and have a controlling interest in land”.
However, the devil is certainly in the detail and there are many ways in which this commitment may not provide us with what we really need to know about who truly owns Scotland’s land. The potential for loopholes and exemptions which would render this register meaningless are substantial.
Most importantly (and let’s get the boring technical stuff out of the way first) this register needs to consist of the “person(s) of significant control” of the legal entities owning land in Scotland. This term is the technical definition of what’s more commonly known as “beneficial ownership” and means that what is registered are the names of the individual people who either own or control land in Scotland. This term already applies in Scotland through a UK-wide register of company beneficial ownership which was introduced in 2015. Adopting this technical definition is the only way to ensure the register will include what we need it to.
This register has the potential to finally shine a light on some of Scotland’s most shadowy corporate entities, for example Scottish Limited Partnerships and the shell company structures used to hide land ownership in Scotland in overseas tax havens and secrecy jurisdictions. Therefore, it’s essential that there are no loopholes or exemptions which these kinds of corporate vehicles can exploit.
The register should of course be free and fully publicly accessible.
We also have questions about process. What the Government’s proposal does is push the more difficult discussions into the next Parliament. So it’s important that the Bill describes the register in robust enough language that it cannot be later watered down, as well as introducing a firm duty and deadline by which the regulations providing for this register have to be adopted.
One major question remains however – why the Government has proposed this register to be separate from the Land Register? My earlier guest blog outlined the reasons why expanding the Land Register requirements to include beneficial ownership appears to be the simplest and most administratively straightforward route to achieving this goal.
But still – what a difference a week makes. This announcement has completely changed the terms of the debate about transparency in land ownership in Scotland and this can only be good. What we need now though are tough ideas and quick thinking to close potential loopholes and ensure this commitment once and for all brings Scottish land ownership out of the shadows.
The Scottish Government has responded to the Rural Affairs, Climate Change and Environment Committee’s Stage One Report on the Land Reform (Scotland) Bill and rejected its recommendation that companies that wish to own land in Scotland should be retired within an EU member state. I will be publishing a wider commentary on this in the next few days. In this Guest Blog, Megan MacInnes, Land Advisor with Global Witness, explores this issue and recommends an alternative solution.
As the new year brings us to the next stage in the debate over the Land Reform (Scotland) Bill, one issue continues to be controversial – whether we shall get to learn who really owns Scotland’s land?
This controversy relates to the fact that large areas of Scotland are owned by companies registered in secrecy jurisdictions known for providing anonymity from the prying eyes of the State and public scrutiny. The Government has made repeated commitments that this Bill will improve transparency of land ownership, but the measures proposed so far have been widely criticised. In their Stage 1 report on the Bill, the members of the Rural Affairs, Climate Change and Environment (RACCE) Committee concluded that “people in Scotland have a right to know who owns, controls and benefits from the land” but that currently the relevant sections of the Bill would “not achieve the policy objectives of improving transparency of land ownership”.
So if the Bill’s current proposals are not enough, what more can be done? Most of the discussions so far have focused on the proposal (originally made by the Land Reform Review Group) to require anyone who wants to buy land in Scotland via a company, to have to have incorporated that company within the EU. But a simpler and more direct solution exists with the potential to be much for effective in letting us really know who owns Scotland’s land – the requirement that when you register a land title with the Land Register under the name of a company, you also have to provide the names of the human beings who own or control that company. Technically, this means the registration of the ‘beneficial owner(s)’ of the company.
The RACCE Committee recommended both requirements be introduced to the Bill. In its response the Government ruled out the EU company registration requirement entirely but with regard to the requirement to register the names of the people owning or controlling those companies, the Government stated that there are “many complex legal and practical issues” being considered and that they will respond in more detail in due course.
The Bill’s current provisions for transparency, under what it calls the “right of access to information on persons in control of land” in fact provide no ‘rights’ at all. Section 35 enables only those who can prove they are directly affected by a landowner to submit a request about who owns or controls that land to a so-far unidentified “request authority”, who would then attempt to obtain that information. Section 36 enables the Keeper of the Registers of Scotland to also make such requests. Applications for such information are first made to the landowner, but if there’s no response then it is expected (but not specified in the Bill) that the request will be passed on to the authorities of the jurisdiction where the company owning the land is registered.
Not only are these ‘rights’ to request such information limited, they will not even work in practice. Neither provision require the landowner to hand such details over, but more importantly, these powers are meaningless in the secrecy jurisdictions where many companies owning land in Scotland are registered. This is because the reputations and economies of these jurisdictions (including Overseas Territories and Crown Dependencies of the UK) depend on providing safe haven and anonymity from prying eyes. These jurisdictions either are only able to share such information with tax authorities (for example, Jersey and the Cayman Islands, where the 71,000 acre Glanavon and Braulen Estate is registered), or are where the relevant authorities don’t maintain company ownership details in official records (for example, Panama, where the 56,000 acre Loch Ericht Estate is registered). Consequently any requests made by either the Keeper or request authority for information on who actually owns either estate will almost certainly be turned down.
The most comprehensive solution to knowing who owns Scotland’s land lies instead in publicly disclosing the names of those who ultimately own or benefit from the company which is buying the land, as the title is being registered. In doing so, the Scottish Government brings these transparency requirements directly within its own purview, rather than relying on the regulations of other countries. It also includes such requirements within existing administrative procedures, rather than burdening the Keeper and request authority with the task of trying to identify who is behind endless structures of shell companies expertly hidden away. If based on the model of the Crofting Register, then we’d not only learn about those behind newly owned parcels of land as they are registered, but this information would also be updated every time the smaller details of the title changed, so-called trigger or update events.
Ironically, despite the RACCE committee’s recognition of the right of people in Scotland to know who owns land in their Stage 1 report on the Bill, much greater consideration so far has been paid to how such transparency provisions would impact on the rights of landowners to privacy and property. Under the European Convention of Human Rights article eight protects an individual’s right to privacy and article one of protocol one protects the right to property. But, neither is absolute; States are allowed to interfere with both, as long as it is in the public interest and such action is proportionate – by which they mean that what is proposed will achieve the desired objective and is deemed to be reasonably necessary.
The public interest arguments for this disclosure are clear and supported widely across Scotland, including associations representing land owners. A number of existing laws and policies (not least the Community Empowerment (Scotland) Act 2015 and other sections of the Land Reform (Scotland) Bill) are likely to be compromised unless we have full knowledge of the ownership of land. But more broadly, land use and its management impacts on all of Scotland’s citizens and therefore there’s a legitimate reason for why everyone should have access to such information. For example, our participation in public consultations, such as the current one underway on Scotland’s 2016-2021 Land Use Strategy, are hindered by not knowing who owns land or the land-use decisions they are making.
Would such a change in the registration requirement also be proportionate? Asking those who ultimately own or benefit from land in Scotland to disclose their names to the Land Register is the most straight forward way to access that information. Critically, it is the only measure available which the Scottish Government can itself enforce.
So it appears that we shall not learn if we are ever to find out who owns Scotland’s land until the Government tables its amendments to the Bill on the 13th January. It’s hard to imagine how the continued anonymity behind such large areas of our land and heritage can continue to be justified. But until the human beings behind anonymous shell companies used to own land are required to disclose themselves, we may be left within nothing in this Bill but empty promises.
The Rural Affairs, Climate Change and Environment Committee (RACCE) of the Scottish Parliament published its Stage One Report on the general principles of the Land Reform (Scotland) Bill on 4th December. The plenary Stage One debate will take place in the Scottish Parliament on Wednesday 16th December.
The Report is thoughtful and considered. I don’t agree with all its conclusions but it provides might food for thought during the Stage 2 deliberations when the Bill is scrutinised in detail and amendments considered.
With the steadily growing interest in land reform, it is important at the outset to make clear that this Bill is not the sum total of land reform and cannot be expected of itself to deliver the kind of radical change that many are seeking. Further reform in land taxation, inheritance law, housing tenure and compulsory purchase are all being progressed separately. In addition, the demand to make the Bill more radical is constrained. Generally speaking, it is difficult to add a lot of new provisions to a bill as it is going through parliament.
Having said that by way of preamble, what of the Committee’s report? In this blog I highlight some of the points that strike me as interesting and explain why, in one part of the Bill, the Committee has come to very mis-informed conclusions.
As more and more people and organisations engage with the fundamentals of land reform (changing the legal, fiscal and governance framework for how land rights are defined, distributed and exercised), a range of refreshing perspectives is emerging. Two of these relate to inequalities and human rights.
NHS Scotland submitted valuable evidence on health inequalities and how land reform can both help to overcome some of these but can also be exacerbated if existing patterns or inequality are not confronted. Similar observations were made by Professor Annette Hastings during the passage of the Community Empowerment (Scotland) Act. The Committee makes important recommendations (90-93) on this topic which will help to ensure that equalities become a core part of land reform in the decades ahead.
Human rights is also an area that has received significantly more attention in relation to land rights in recent years. Community Land Scotland provided valuable focus on this in its Bunchrew Declaration from 2014 which highlighted the range of human rights issues associated with land reform. These go far beyond the traditional and rather narrow concerns of the protection of property rights in Article 1 of Protocol 1 of the European Convention on Human Rights (ECHR) which is embedded in the Scotland Act 1998. This paper by Megan McInnes and Kirsteen Shields elaborates this point.
It is often overlooked that the observance and implementation of all international human rights instruments (indeed all international treaty obligations) that relate to devolved matters are within the competence of the Scottish Parliament (1).
Recommendations 121 and 122 helpfully address this important point.
Parts 1 and 2 of the Bill deal with the Land Rights and Responsibilities Statement and the Scottish Land Commission. Here, RACCE make some sensible recommendations that will clarify and improve the proposals in the Bill.
Part 3 deals with transparency of information about who owns land and, in particular the proposal originally contained in the December 2014 consultation that any owner of land in Scotland that was a legal vehicle such as a company or a trust should be registered in a member state of the EU. This proposal would end the ownership of land registered in tax havens such as Grand Cayman and Panama.
The Scottish Government has been very resistant (see here) to proceeding with this reform but the Committee recommends that it be looked at again and that it be applied retrospectively (thus existing non-EU entities would have to comply within a defined period of time). This is very welcome and should open up this important issue to further scrutiny.
Parts 4 and 5 on engagement with communities and the right to buy land for sustainable development. Again, the Committee’s recommendations are measured and helpful in improving the detail of how these provisions will will work in practice.
Part 6 is one of the simplest and straightforward reforms in the Bill – the removal of the 1994 exemption from non-domestic rates (NDR) granted to shootings and deer forests. Here, the Committee has expressed strong criticism of the proposal to end this exemption and made a number of recommendations. In broad terms, it is not convinced of the case for removing the exemption because of the potential impacts this might have. In coming to this conclusion, however, the Committee appears to have been seriously misinformed by the special pleading of those who stand to be affected by the proposal and to have relied solely on assertions made in evidence from landowners, shooting interests and gamekeepers, all of whom predicted impacts on rural jobs, economic and communities if the exemption was removed.
A key error in the Committee’s conclusions is to view NDR as a tax on businesses. A number of opponents of the proposal were keen to persuade the Committee of this. Scottish Land and Estates, for example, in its written evidence to RACCE claimed that,
“The proposal completely fails to recognise that sporting rights per se are not in fact a business”
“We believe that there would be a negative impact on rural jobs, tourism and land management”
“For all subjects where the sporting rights are not exercised as a business, this produces the entirely illogical and potentially unlawful situation whereby business rates are being levied on subjects which are not in fact businesses.”
Non-domestic rates are not a tax on businesses. They are a property tax – a tax on the occupation of land and property and based upon the rental value of of land and property. Many businesses of course occupy land and property but NDR is not a tax on their business (newspaper shop or factory). It is the capture of part of the rental value of the land and property they occupy. NDR is paid by many occupiers that are not businesses such as cricket clubs and secondary schools. Even the Scottish Parliament pays NDR.
Paragraph 310 of the report states that –
The Committee seeks a thorough, robust and evidence-based analysis of the potential impacts of ending the sporting rates exemption (including what impact imposing the exemption had in 1995).
There is little need for such an assessment for the simple reason that the impact of any reform of property taxation is well understood. By definition it has no impact on environmental matters (it is not an environmental tax) and no impact on social matters (it is not a welfare or employment tax). Of course, no-one likes have to pay tax especially if it is a tax that someone had gained an exemption from. But the special pleading made by landed interests is little more than a veiled threat that if the exemption is ended, those responsible for paying it will choose to do things that might have negative effects (reduce environmental management inputs or reduce employment). The tax itself has no such impacts and the potential impacts are straightforward to determine.
The impact is succinctly described in the Mirrlees Report as follows (this is in relation to land value taxation but the impact is exactly the same for any tax on the occupation of land or property).
“The economic case for taxing land itself is very strong and there is a long history of arguments in favour of it. Taxing land ownership is equivalent to taxing an economic rent—to do so does not discourage any desirable activity. Land is not a produced input; its supply is fixed and cannot be affected by the introduction of a tax. With the same amount of land available, people would not be willing to pay any more for it than before, so (the present value of) a land value tax (LVT) would be reflected one-for-one in a lower price of land: the classic example of tax capitalisation. Owners of land on the day such a tax is announced would suffer a windfall loss as the value of their asset was reduced. But this windfall loss is the only effect of the tax: the incentive to buy, develop, or use land would not change. Economic activity that was previously worthwhile remains worthwhile.” (2)
When rates on shootings and deer forests were abolished in 1995, the impact then was straightforward. It resulted in a windfall gain for landowners either because their land rose in value as a consequence of the removal of the recurrent liability or they could extract more rent since the occupier (who paid the tax) was relieved of the liability and thus able to afford a higher rent whilst being no worse overall (the new rent equalled the previous rent plus rates).
Given that the Committee is not routinely involved in fiscal policy, it perhaps not surprising that it has swallowed the assertions of those whose evidence was based on a flawed understanding of property taxes.
Over the past 20 years, the owners of shootings and deer forests have been granted an exemption from tax that has had to be paid for by increasing the burden on other non-domestic ratepayers. Over the course of two decades they have profited from this tax break. It is entirely reasonable when public finances are tight that such exemptions (which exist for no good reason) should be removed.
The re-establishment of a local tax liability on land devoted to shooting and deer forests ends the indefensible abolition of this element of non-domestic rating by the Conservative Government in 1994. To most people, it might seem odd that, whilst the hair salon, village shop, pub and garage are subject to rating, deer forests and shootings pay nothing. To take one example, the Killilan deer forest near Kyle of Lochalsh is owned by Smech Properties Ltd., a company registered in Guernsey which, in turn, is owned by Sheik Mohammed bin Rashid al Maktoum, the King of Dubai and Prime Minister of the United Arab Emirates.
Killeen was included on the valuation roll in 1994 at a rateable value of £3500. By comparison, the local caravan site had a rateable value of £3100. Today, the caravan site has a rateable value of £26,250 and pays £12,127 per year in rates whilst one of the worldʼs richest men, whose land is held in a tax haven has (unlike the local caravan site) paid no local rates for twenty years on the land he uses for shooting.
Why should caravan sites, pubs and local shops subsidise those who occupy shootings and deer forests? Non-domestic rates contribute to the revenue of local authorities used to pay for schools, roads, refuse collection, care homes, environmental and leisure provision and social care.
Back in the early 1990s, the abolition of the rates on shootings and deer-forests attracted considerable criticism at the time from opposition parties and by the then Chairs of Scotland’s Rating Valuation Tribunals who, in a memorandum to the Secretary of State for Scotland, wrote,
“Sporting estates like to describe themselves, when it suits them as being part of a sporting industry. In fact they are part of an inefficient trade which pays inadequate attention to marketing their product, largely because profit is not the prime objective.
These sporting estates change hands for capital sums which far exceed their letting value and which are of no benefit to the area, and are often bought because there are tax advantages to the purchaser, not necessarily in the UK.”
Dismissing the argument that sporting estates provide employment and should therefore be freed of the rates burden, the chairmen’s report points out that,
“..local staff are poorly paid, their wages bearing no relation to the capital invested in the purchase price, and it is not unusual to find a man responsible for an investment in millions being paid a basic agricultural wage. Many of the estates use short-term labour during the sporting season, leaving the taxpayer to pay their staff from the dole for the rest of the year. Estates can in many cases be deliberately run at a loss, thereby reducing their owner’s tax liability to central funds elsewhere in the UK.
Finally, the Committee is recommending analysing the impact of the exemption in 1995. Again, this is straightforward – the removal of the liability was capitalised into land values and resulted in windfall gains for existing owners. This was well understood at the time by landowners themselves.
In a letter written to members of the Scottish Landowners Federation in April 1995, the President, informed them that abolition make a “great success” for the Federation “culminating many years of negotiation”. “Many members will be relieved of substantial expense”, he observed and then went on to appeal to members to donate some of the windfall gains to the Federation to contribute to a contingency reserve that would be used, among other things to fight new environmental constraints “being imposed on certain classes of land” which, as a result “must lose some of its capital value”.
Members who were being “spared Sporting Rates” were invited to donate one third of their first year’s savings to the Federation. By June 1995, over £54,000 had been donated. It is not known if further appeals were launched.
Therefore, as far as the impact of the exemption is concerned, the windfall gains ended up in landowners pockets and some of it was used to fund lobbying activity.
Conclusions
The challenge for the Stage 1 debate is to address the observations made by RACCE and to clarify what further progress can be made to address them within this Bill. In addition, it is an opportunity to explore what outstanding issues (and there are many) might be addressed in the manifestos of the political parties for the 2016 Holyrood elections when Parliament will have a five year term to push ahead with further reform.
NOTES
(1) Schedule 5 Part I 7(2)(a) of the Scotland Act 1998
I asked a simple question – against whom would such a charge be brought? The estate is owned by Kildrummy (Jersey) Ltd. and, having outlined the complex ownership structure of Kildrummy (Jersey) Ltd. (see below and January blog for a full explanation), I speculated that the Crown Office might have a job on its hands to determine who (if anyone) could be prosecuted.
This week, thanks to the diligent and dogged investigative work undertaken by Raptor Persecution Scotland (RPS), we are now closer to answering that question. In September 2015, the Crown Office told RPS that,
“Despite further investigations including investigations which focused on establishing vicarious liability, no-one else has been reported to COPFS in relation to the events which took place in Kildrummy Estate in 2012 and accordingly, no further prosecution, including any prosecution for a vicarious liability offence, has taken place“
RPS followed this up by asking Police Scotland why they had been unable to report anyone to the Crown Office who might be considered to be vicariously liable for the crime carried out by George Mutch. Police Scotland’s response was published by RPS yesterday. The key part of Police Scotland’s reply is as follows
“Significant international investigations were undertaken……..it was established that due to insufficient evidence the additional charge of Vicarious Liability could not be libelled“.
This suggests that it was impossible, within the resources available to investigators, to identify with sufficient certainty who is actually behind Kildrummy (Jersey) Ltd. The Police may well know who could be libelled for the offence but had insufficient evidence to connect that person with Kildrummy (Jersey) Ltd. for the simple reason that is is virtually impossible to ascertain the answer to that question. If the Police, with the full range of investigatory powers available to them (including powers to force the Jersey authorities to divulge what information they hold), cannot find that answer, it is hard to see how anyone else might be able to.
Beyond the implications for wildlife crime legislation (and the Police note that “The experience of this case has, however, identified opportunities for refining future Vicarious Liability investigations….”), this raises questions about Scottish Government policy in relation to the offshore ownership provisions in the Land Reform Bill.
In a blog – Scottish Land and Secrecy Jurisdictions -from last month, I refuted the Scottish Government’s arguments as to why they could and would not implement the recommendation by the Land Reform Review Group and the proposal in their own consultation paper to restrict the registration of land by legal persons (companies etc) to those registered within the EU. The provisions currently set out in Sections 35 and 36 of the Bill merely allow authorised persons to ask the Keeper of the Registers of Scotland to, in turn, ask further questions about the true ownership of companies in secrecy jurisdictions. It is a meaningless provision since authorities in Jersey, British Virgin Islands and Grand Cayman are under no obligation to provide any answers. If even the Police cannot find such answers, what hope has the Keeper?
Included in the Scottish Government’s reasoning was a bullet point 3 that
“There is no clear evidence base to establish that the fact that land is owned by a company or legal entity that is registered or incorporated outside the EU has caused detriment to an individual or community.”
The Kildrummy case is prima facie evidence of precisely the circumstances in which opaque ownership in a secrecy jurisdiction has caused detriment – specifically to the ability of the Police to gather the necessary evidence to pursue a prosecution under an important statute passed by the Scottish Parliament.
Had Kildrummy Estate been owned by a company registered in the EU, the Directors of that company would be easily identified and could have been charged with vicarious liability.
The Rural Affairs, Environment and Climate Change Committee is currently preparing its Stage One report into the Land Reform Bill due to be published in early December. It might like to reflect on the Kildrummy case
The Scottish Tenant Farmers Association issued the following media release today.
WITHOUT ACTION, FARM EVICTIONS WILL BECOME SCOTLAND’S SHAME
The Scottish Tenant Farmers Association has welcomed the focus given to land and tenancy reform at last week’s SNP conference and the clear signal from SNP grassroots support for strengthening the land reform proposals in the current bill. The delegate’s call followed a powerful documentary on Channel 4 TV which highlighted what are seen as some of the worst areas of bad land and estate management in Scotland.
The conference also heard pleas to halt the impending eviction of tenant farmer Andrew Stoddart whose tenancy on Colstoun Mains in East Lothian is due to come to an end in a few short weeks. Andrew Stoddart, who also spoke at a fringe event, is the first of the Salvesen Riddell tenants to be forced to quit their farms following the Remedial Order passed by the Scottish Parliament last year.
Commenting on the grassroots “rebellion” at the SNP conference, STFA Chairman Christopher Nicholson said: “STFA has been concerned that the government may have been wilting in the face of intense pressure from landed interests, intent on weakening what can only be seen as an already diluted bill. We hope that this message from the conference will strengthen the government’s resolve to deliver more radical and much needed reforms to create fairer conditions for tenant farmers, stimulating investment on agriculture, greater access to land and encouraging opportunities for new entrants.”
STFA has also become appalled at the recent treatment of tenant farmers affected by the Salvesen Riddell Remedial Order, including Andrew Stoddart who faces imminent eviction without having had the opportunity to take part in the government’s mediation process or be considered for any recompense which should be due from the government following the implementation of the Remedial Order.
STFA Director, Angus McCall who has been involved in the Salvesen Riddell debacle for the last few years said: “This whole episode has become Scotland’s shame which has seen the victims of a legal error hung out to dry by uncaring government lawyers and an inflexible government process.
“This tragic episode stemmed from legislation passed in 2003 which was proved to be defective. The UK Supreme Court then instructed the Scottish parliament to remedy the situation and, as a consequence, 8 families will lose their farms and livelihoods. However, rather than seeking to fulfil commitments made by government to parliament and the industry, government lawyers are abdicating all responsibility and liability and refusing point blank to consider any compensation package for the affected tenants. These tenants are now faced with a lengthy and expensive court battle to exert their rights.
“STFA has already written, and is writing again to the First Minister, Cabinet Secretary, Richard Lochhead, the RACCE committee and MSPs to get the matter resolved and allow these tenants and their families to move their lives on, but all to no avail. Ministers, MSPs and some officials have expressed a willingness to help, but seem to be held to ransom by lawyers.
“We all appreciate that this is a complex situation, but the rulers of this country must accept a moral responsibility for the damage done though the actions of a previous government to these families and move without further delay to find a way towards an equitable settlement rather than forcing them into a long drawn out, expensive and life sapping legal battle. This has been devastating for all concerned and, after 18 months of prevarication, the tenants’ lives are still on hold and they are no further on in knowing their future.
“This affair has been a well-kept secret, but it must be time for the Scottish people to wake up and realise what is going on and allow common decency and a sense of fair play to prevail and put an end to this sorry affair before any lives are tragically lost as has happened in the past?”
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.
BACKGROUND
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.
RACCE ASKS QUESTIONS
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.
Trusts
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 WAY FORWARD
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 have prepared a Briefing on the Bill designed to provide a non-exhaustive analysis and to help those wishing to submit evidence.
The Bill forms part of a much wider programme of land reform. Other ongoing work by government includes reform to succession law, council tax, private rented housing, land registration and compulsory purchase law. The Bill should thus be seen as part of a wider programme and not the sum total of land reform measures. It should also be stressed that, as the first two parts of the Bill make clear, land reform is a process that will necessarily not be concluded by the end of this Parliament. Indeed it will probably take a generation before Scotland’s land governance is set on anything like a modern footing.
The Bill itself contains welcome measures and these are analysed in the briefing. The most worrying aspect of the Bill as it stands is the abandonment of proposals made in the December 2014 Consultation to bar companies in offshore tax havens from holding title to land and property in Scotland. This would have been a progressive move and one in which Scotland could have been taking the lead in a UK context. Instead, the Bill proposes a meaningless right to request information.
Last month, Private Eye revealed that over 750,000 acres of land in Scotland – an area larger than Ayrshire – was held in tax havens. It applauded Nicola Sturgeon for taking a lead in tackling the problem. Their enthusiasm was premature.
Prime Minister David Cameron has announced plans to publish details of offshore corporate ownership in the English and Welsh Land Registry and pressure from NGOs like Transparency International to clamp down on the use of offshore shell companies is proving effective in westminster. The Scottish Government, however, now finds itself being outflanked by the Tories in efforts to crack down on secrecy and tax evasion. The Scottish Parliament has an important role in scrutinising exactly why this has happened.
Other parts of the Bill are broadly welcome though important matters remain to be debated further as the Bill proceeds through Parliament.
Following my previous blog on the offshore interests of the Scott/Buccleuch family, the Panama Papers have emerged. I look forward to interrogating the 2.6 terabytes of data once it is made available for public examination in early May.
Dalkeith Estate
Sunlight or shadows – will the Government’s new public register of land ownership be effective in improving transparency?
Transparency in the Land Reform Bill: the only effective solution is disclosing the human being, the ‘beneficial owner’, behind companies owning land
The Rural Affairs, Climate Change and Environment Committee (RACCE) of the Scottish Parliament published its 
In January, I 
Image: Land Reform Minister, Aileen McLeod at launch of Land Reform Bill with Carluke Development Trust. Photo by 