PLANS to stamp out corruption and money laundering by revealing the identities of all owners of Scottish land could have the inadvertent effect of deterring investment in the country’s property sector, lawyers have warned.
Under the terms of the Land Reform (Scotland) Act 2016, which received Royal Assent in April, a register of so-called ‘persons of controlling interests’ in Scottish land will be set up and the details could ultimately be made public by the Registers of Scotland, the body responsible for registering land and property.
While the Scottish Government is currently consulting on the exact details of the regulations, HBJ Gateley partner Alison Newton said the introduction of the changes would have to be carefully handled so as not to put investors off.
“There’s a growing trend for wealthy overseas investors to consider Scotland as a stable and attractive place to invest in property - that creates and protects jobs, as well as enabling investment in property assets,” she said.
“Better transparency is always a good thing, but that has to be set against the wishes of some highly respectable – and respected – investors for an element of commercial discretion.
“The last thing we want to do is create a regime where foreign investors feel unwelcome, especially at a time when confidence remains patchy in the domestic market.”
The changes are being brought in to make it clear who owns and controls the land in Scotland, much of which is thought to be owned by anonymous companies based in tax havens such as Panama, the British Virgin Islands and Grand Cayman.
Richard Rennie, a partner at law firm Burness Paull, agreed with Ms Newton that some investors could be put off by the thought of their details being made public, but said the argument that they should not invest unless they are willing to say who they are is too simplistic.
“Many of the ‘super-rich’ who have invested in estates or commercial investments in Scotland could be put off by the need to provide information on who holds controlling interests in vehicles used to purchase these properties,” he said.
“In response, the Government are likely to say that if you are not prepared to say who you are, then you shouldn’t be investing in Scotland anyway.
“That response is, of course, over simplistic and fails to appreciate that those who buy behind the cloak of an offshore trust or corporate body usually have legitimate reasons for keeping their activities confidential.
“However, it is clear that the current focus for international co-operation and attack on tax evasion using offshore havens means that Scotland will not be the last country to try to open up its land ownership records to establish who really owns the country.”
As part of its latest consultation the Scottish Government is seeking views on areas such as the definition of controlling interest and the type of land the legislation should cover.
“Consulting comprehensively with people who know the sector inside out will help the legislation to tread the right line between deterring corruption and attracting valuable and very welcome foreign investment on a level playing field,” Ms Newton added.
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