Some good work by Transparency International in the UK is reported by the FT today. As the FT notes:
The secrecy surrounding foreign owners of high-value London properties has long given rise to suspicions of hidden corruption and money-laundering.
Now an analysis of official data has shown that more than 40,000 London properties are held by foreign companies, of which almost 90 per cent are incorporated in tax havens, such as the British Virgin Islands, that do not require them to disclose ownership information.
Although many wealthy investors use offshore shell companies for legitimate reasons, the extensive use of so-called secrecy jurisdictions has raised questions about what some purchasers are trying to hide.
Three things are of note.
First is the use of the term secrecy jurisdiction. I introduced this to use in 2008. It's now widely used. We are changing the terms of the debate.
Second, secrecy is the key here and it is secrecy that has to be shattered.
Third, there is an answer to this problem of secrecy, and it is really quite simple. For reasons that I consider quite absurd it is not considered necessary for a foreign company that owns property in the UK to be registered at Companies House as if it is undertaking an activity in this country. That makes no sense at all: quite clearly it does have a presence in the UK, through the property it owns, and it may be undertaking what I consider to be a trade here (although pedants will say that receiving a rental income or managing property does not constitute trade, but that is merely an excuse).
So, the answer to the problem of finding out the beneficial owners of these companies is simply solved by requiring that any company not incorporated in the UK that owns land or buildings in this country must be registered with Companies House. That would then require three further things.
First, in the near future its beneficial ownership would have to be disclosed.
Second, it would have to file accounts in the UK, and so become responsible for its actions in this country.
And, third, if it did not comply with these requirements we could require by law that the company could be struck off the Register of Companies and its property in the UK would become forfeit, and so pass to the Crown, meaning it could be sold for public benefit.
If that does not release the necessary information on who the beneficial owner of a property is, then at least we will have the property to sell instead for public benefit. That may not answer all questions, but it will certainly be some compensation.
What beats me is why such straightforward answers to relatively simply solved problems cannot be proposed for use in the UK by those with the power to enact them.
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“First is the use of the term secrecy jurisdiction. I introduced this to use in 2008. It’s now widely used. We are changing the terms of the debate.”
You might want to check that claim. I read a book fairly recently (not for choice – work related) called “Banking Secrecy and Money Laundering” by Marco Zwick, which discusses very similar things to you – and specifically uses the term “secrecy jurisdiction”.
Except it was written in 2003. So if nothing else, I wouldn’t be shouting from the rooftops about your grand achievements when they belong to someone else.
Apart from that, what you are suggesting is pretty ludicrous. Foreign companies don’t have to register at companies house full stop. They are allowed by law to have assets in this country (property, banks accounts etc). Are you going to stop, or at least put up large barriers to doing business for any foreign company wanting to come here?
Your suggestion that somehow making these companies register at companies house would solve the problem you are trying to fix is also nonsense. Data held at companies house doesn’t necessarily help you find who the ultimate owners are (companies can hold companies etc) and nor does it tell you how much tax has been paid, money has been laundered etc. Do your company accounts show how much tax is ultimately paid by your company? My guess is that they don’t. The net profit gets paid out to you, and you don’t publish your income tax returns….so we can never tell if Tax Research is paying a “fair” amount of tax, or doing anything else untoward.
Plus, of course, confiscating things without recourse is illegal under UK and EU law – unless you can prove they were proceeds of crime. Are you sugesting that the law in this case should be guilty until proven innocent?
The term was used, but not defined, which i did. I gave the link
And as a result it is now used
And I am promoting a change in the law, to enhance transparency, accountability and tax payment. Do you have a problem with that?
As for confiscation – that’s what happens now to companies struck off. Please get your facts right. The property becomes bono vacantia – and so the Crown’s
Well, some foreign companies are required to register at Companies House, if they are operating through an establishment in the UK, but by definition they will be incorporated elsewhere.
Striking off a UK company has the effect of dissolving it, and yes its assets become bona vacantia. But Richard seems to want to confiscate the assets of companies that are incorporated elsewhere and which will continue to exist as legal entities, whether or not they are have complied with any administrative filing requirements in the UK. Does the punishment fit the crime?
That said, I have some sympathy with the idea of requiring non-UK companies operating in the UK to make disclosures, like UK companies will have to shortly. From a quick review, the beneficial ownership disclosure obligations in the Small Business, Enterprise and Employment Bill only seem to apply to UK companies, though. Is that the intention?
Richard also seems to have his own definition of a trade, which differs from the definition generally used under English law. Would you consider passively receiving rental income to be a trading activity?
I am seeking to redefine the law!
Is that a concept really so hard for you to understand?
Are you being obtuse, or just stupid?
And yes, the punishment fits the crime.
Now, let’s move on shall we and leave dinosaurs behind
The term has been in use, with the same meaning, since the 80’s. Lot’s of academics have written papers on the subject – you haven’t created anything new here. For example, going all the way back to 1986:
http://www.jstor.org/discover/10.2307/40176181?sid=21106021723793&uid=4&uid=70&uid=2&uid=3739368&uid=2129
But thanks for defining it for us all, again, and metaphorically sticking your flag in it and claiming it as yours. Linking to your own definition is not the same as defining the term for all others.
As you say, you are trying to change the law. It does help if you understand it first though.
Bono Vacantia only applies to ownerless property, and the state has a duty to make sure that said property is truly ownerless. It can’t just confiscate it on a whim. In addition too what Andrew said, dissolving a company doesn’t mean the assets necessarily become Bona Vacantia either.
But he is completely correct in saying that what you are essentially trying to do is make it possible to confiscate assets of companies who aren’t incorporated in the UK.
“And yes, the punishment fits the crime.”
What crime? Owning property? Being a foreign company?
Fortunately, we still have the rule of law in the UK, not the rule of Richard Murphy, and you are innocent till proven guilty. We even have a law to deal with what happens to the proceeds of crime.
Reading the Transparency International report is a bit of a hoot as well. They do understand that buying property is the last leg in the money laundering chain, and seem pretty clued up regarding current AML regulations but they get a little bit excited when talking about the scale of the problem.
“According to data released by the Metropolitan Police’s ‘Proceeds of Corruption Unit’ (POCU), over £180m worth of property in the UK is or has been under criminal investigation by the Unit as the suspected proceeds of corruption in the last 10 years. This total value represents 120 properties in the UK that have been brought under investigation since 2004 that have a recorded or estimated value. A remaining 24 have no estimated value.”
144 properties in 10 years! (And they say only 80% of that or so is held offshore). It’s an epidemic!
So my claim on secrecy jurisdiction’s is right then. I am glad we have agreed that.
And likewise you now agree I am entitled to ask for a change in the law
I’m glad we have resolved that
No, your claim on secrecy jurisdictions is one of your own pure fantasy.
The term has been used for the same meaning for at least 20 years before you laid claim to inventing it. Self-referencing your own defintion means nothing. If anything, it just makes you look like a rather self-important plagarist.
Sure, you can ask for a change in the law. But that isn’t answering my questions. (Though from this brief discussion you seem pretty keen on answering questions you put to yourself, which obviously you agree with, not the questions other people put to you).
Are you seriously suggesting that the law should be changed to guilty till proven innocent, and property can be arbitrarily confiscated by government?
I am saying failing to comply with the law should result in a company being struck off
And if its property falls to the state as a result, so be it
That’s what happens
As for secrecy jurisdiction: I will accept the opinion of my peers. Your claim is akin to that made that I did not create country-by-country reporting. Both are laughed at
It’s pretty hard (impossible, when they don’t appear on the register in the first place) to strike a foreign company off the UK companies house register. So your point is moot. Again, you are answering a question of your own devising, not the one which was asked.
What you are suggesting is basically a law legitimising expropriation of foreign assets by the state. A long standing favourite of the world’s dictators.
Innocent until proven guilty, or guilty by default, till proven innocent? Which one do you stand by? Your article suggests the latter.
By claiming that you invented and defined the term “secrecy juridiction” when there is plenty of evidence to the contrary, my guess is that the only person who will get laughed at is you, in all your pomposity. The term has been used in various countries laws for decades – but no, Richard Murphy invented it and brought it to the world’s attention!
Next you’ll be telling us that you invented the lightbulb.
Things that are hard can be changed
That is why the law needs to be addressed
Amd next you will be telling us Microsoft did not redefine the word Windows
So you are tacitly endorsing the idea that the law should be guilty until proven innocent, when it comes to foreign companies, because there may be a suspicion that some of them (and the evidence suggests a very small proportion) might be doing something illegal. Not withstanding that there are already laws in place to deal with such things (proceeds of crime, money laundering etc).
I feel that what you really want is more government control over everything, so it can extract more money to pay for your pet projects – let alone project its power over the populace.
Microsoft re-defined the word “windows” in terms of a product. Which was mostly new – apart from the bits they “borrowed” from Apple.
You haven’t done anything new. You’ve taken existing definitions, in use for years, written a little paper and called it your own.
That’s simply plagerism. But you think you deserve credit for it?
I am s guesting a new law on disclosure for non EU companies with land assets in the UK
Nothing more or less
But you w ish to divert attention from that fact by an ad hominem attack. How very typical. I wonder, are you secrecy jurisdiction based by any chance?
I am sorry you felt the need to descend to personal invective. I was trying to clarify (my understanding of) the current legal position and the changes you are proposing. Perhaps it was stupid or obtuse of me to expect a reasoned debate, but let me try again (in the forlorn hope of a different result….)
You seem to be suggesting (a) a new extended definition of “trade” (or at least extending the circumstances in which a non-UK company is required to register with Companies House in the UK), and (b) extending the (not-yet-in-force) beneficial ownership disclosure requirements to non-UK companies (as I understand they will only apply to companies incorporated in the UK as things stand), and (c) confiscating the assets of non-UK companies that fail to comply with the extended registration and disclosure requirements.
By definition, a foreign (non-UK) company is incorporated outside the UK. It will continue to exist as a legal entity, whether or not it is registered with Companies House in the UK. When a UK company is struck off the UK register, it ceases to exist. Confiscating the UK assets of non-UK companies that continue to exist as legal persons is not at all like the Crown succeeding to the ownerless assets of UK companies that have been struck off.
As I said, I am sympathetic to disclosure and transparency – particularly as I would like to encourage people to base themselves in the UK, and I fear UK companies will shortly be potentially disavantaged compared to non-UK companies. Failure to comply could be an offence with penalties and fines – but confiscation by the state is extreme and I would suggest unlawful.
I went to a lecture by Gabriel Zucman at the LSE recently. He was suggesting a worldwide public register of all financial assets. I am sure we would all be interested to see what everyone else has in their bank accounts, but some of us value our own privacy.
You completely miss the point again
I am not asking for your personal details
I am asking for corporate data and am suggesting sanctions if it is not supplied
That is something very different and it’s clear you are either don’t get the point or are deliberately missing it
Which is what I pinted out previously
As for state confiscation being illegal, very politely, that’s absurd. A whole range of corporate law would suggest it is entirely possible
Honestly I’m not sure what you are really suggesting now. What you do say is confused and highly contradictory.
“I am saying failing to comply with the law should result in a company being struck off”
“I am s guesting a new law on disclosure for non EU companies with land assets in the UK”
Except foreign companies cannot be struck off the UK register – they aren’t on it in the first place.
Your argument really boils down to saying that tax havens are bad, anyone who uses them is bad because they *must* be doing something criminal and that the government should ignore property rights and the rule of law and just take their properties away from them.
I’ve looked through a few of your other ideas and posts now. Do you simply pour forth on a subject without stopping to think about any potential problems, or checking data and facts? It leads you to making massive and obvious errors, and frankly looking pretty amatuer. Which you happily compound by unrelentingly claiming you are correct.
So when someone (other than your usual sychophantic “peers”) points out said error, you are unable to answer simple questions in a factual manner, mostly replying in rhetorical terms. Oh, and you are happy to employ ad hom and smear attacks it seems – I’m from London by the way.
This is very boring
I am suggesting these companies should be on the register and fully compliant or all their property would be forfeit
And how would we know they have oproperty? The land registry
So, all of this is possible, and desirable
And, as for the errors…..yes, of course. That’s why so many of my ideas are now resulting in action
But keep telling your stories if you want to believe them
Excuse me ‘Don’ but it is all very well someone writing about something about this subject when in fact what Richard has actually done as a recognised campaigner (read his blog for goodness sake) is actually get something done about it – getting the issue taken seriously by the powers that be. That takes a lot more than putting pen to paper.
Even you must see the difference in that, surely?
Richard,
Good points.
Just a clarification – the new beneficial ownership disclosure rules will not apply to branches of foreign companies registered with Companies House (apparently something to do with EU law). So presumably the recommendation is that in order for a foreign company to own UK property, it would have to register a UK subsidiary, which in turn would have to disclose its beneficial ownership under the new public register that will come online in April next year.
An alternative is to require the Land Registry to collect and disclose beneficial ownership information for the 40,000-odd offshore companies that currently own UK property. It would be good to get your thoughts on what would work the best.
Robert
I am saying UK law should require this – and EU companies could be excepted if need be
Such foreign companies are required to register in the UK now if trading here so there is nothing radical in what I am suggesting, or precedent breaking
All the BVI etc companies noted by TI could be covered by such a law without coming near falling foul of EU regualtion
“What beats me is why such straight forward answers to simply solved problems cannot be proposed for use in the UK by those with power to enact them.”
Maybe some of those in power are part of the problem. I sometimes wonder how many of them, or their close families, own offshore assets for example. It would be interesting to know the answer as it could go some way towards explaining their lack of will to act.
You conveniently overlook the fact that if the offshore company is generating rental income, which you might consider to be a trade or business, then the net rental income is already subject to UK tax. The tenant is obliged to deduct UK tax at source unless the offshore company has already registered with HMRC under the Non-Resident Landlord scheme. If the property is not being rented out then there very clearly isn’t a trade or business being carried out. So, either there is rental income and it is already being taxed, or there is not, in which case there is no income to tax.
Under the new rules, all capital gains made by offshore companies owning UK residential property are now taxable. Admittedly it is a new measure, but it is already in place.
So there are no tax issues involved. There is no tax leakage. This is purely about a desire to invade privacy for no tax-driven purpose. The nosey parker syndrome.
It makes no sense whatsoever to discourage tax-compliant foreign investments in the UK from being made where law-abiding citizens wish to retain their lawful privacy.
I assume you are also aware that solicitors and banks who handle UK property transactions are of course subject to extensive anti-money laundering legislation,
So what’s the problem?
Rent is not defined as a trade
But I am saying the ownership of property here should be enough to require regsitration
Why not?
This is not about tax per se, although clearly if the sums used to purchase the property were money laundered it can be. It is about transparency, accountability and disclosure.
Oh, and banks subject to AML? Like HSBC?
Whose leg are you pulling?
Or alternatively, I will ask as I have another commentator tonight, are you being obtuse, or just stupid?
“This is not about tax per se”. Oh sorry, I though it was a tax website. You know, Tax Research?
I agree totally with you re banks and AML, but not the same as solicitors!
You say its about “transparency, accountability and disclosure”. Why? All due taxes are payable whether beneficial ownership is disclosed or not. What you are suggesting would make no difference whatsoever to the tax position. You just want to know who owns it but you have no reason to need to know. You are not paying any more taxes as a result.
I am not saying this is wholly about tax.
It may be.
What it is about is securing data to ensure tax is paid, which is a pre-requisite of that happening, if it is required
And you don’t want that data to be available.
Why not, I wonder?
Do you always descend to abuse of those who disagree with you, or are you just right about everything?
It seems to me that if any change in the law is required, it would be sufficient to require disclosure of beneficial ownership to the Land Registry. HMRC or indeed anyone would have access to this information for whatever enquiries they wanted to lead. I can think of no genuine reason why ownership of real property should be secret, regardless of the use to which the property is put.
I replied to the comment you made in what I considered appropriate fashion given it ignored the issue and what I said
And you propose a sanctionless change to the law
I prefer my law to work
And that’s the difference between us, no doubt
“… it would be sufficient to require disclosure of beneficial ownership to the Land Registry.” That is an interesting point. Of course, the Land Registry is incomplete – mostly because inherited landed estates have not changed hands since the Registry was created – I wonder how many of those are owned offshore. To me it’s a democratic right that we should know who is the beneficial owner of the land which is in fact our common inheritance. However, when it comes to land value taxation, which is the corollory to this fact, you don’t actually have to know who owns it at all. The tax bill can be sent to the user – the local authority or DEFRA will know. If not registered or used it can be confiscated and auctioned.
“And, third, if it did not comply with these requirements we could require by law that the company could be struck off the Register of Companies”
How can you strike off a foreign incorporated company from the Register of Companies. Under your proposals, a foreign incorporated company owning UK property must register at Companies House. OK. But a foreign incorporated company cannot simply be “struck off” – which means the company ceases to exist – as a matter of fact it continues to exist under the laws of the country in which it was incorporated. Have you thought this through?
The suggestion was galringly obvious
No registration and land assets in the UK would be forfeit
It’s not hard to understand, is it?
Unless……
“As for state confiscation being illegal, very politely, that’s absurd. A whole range of corporate law would suggest it is entirely possible”
It is generally accepted that confiscation should firstly be an absolute last resort of government and secondly should be proportionate. Confiscation of a property worth potentially millions of pounds for failing to disclose the beneficial owners of a foreign company which holds a property in the UK strikes me as wholly disproportionate. As someone said, the punishment must fit the (proposed) crime. It would be akin to confiscating an individual’s home for misdeclaring the number of people in your household for the electoral roll or census. And that is before one considers the necessity of having a register at Companies House of beneficial owners of foreign companies holding assets in the UK.
Politely, you are being ridicuous
Failure to comply with the basics of what would be company law does of course require that a company be struck off in the country and its property be decalred forfeit for it would have no other obvious owner, be definition
But you ignore that fact
I wonder why?
I fear we are talking past each over. I thought I was getting your point – you want to impose compliance obligations on non-UK companies that own UK assets, and want to take those assets away if the companies fail to comply – but it feels like you are not getting my point either. One last try.
Bona vacantia is not confiscation. It is recognising that something needs to be done with ownerless assets. If a UK company is dissolved while still owning substantial assets, it is not that uncommon for the company to be restored to the register so the assets can be dealt with properly (by being distributed to the erstwhile shareholders, for example).
Cancelling the “UK establishment” (branch or place of business) registration of a foreign company from the UK companies registry does not liquidate that foreign company. It still exists under the (non-UK) law under which it was incorporated. It is possible for a foreign company to own UK assets without being “established” in the UK, just like a foreign individual can own UK assets without being resident or “in business” here. A foreign company does not have to be registered in the UK to exist.
Are you suggesting perhaps that UK law should not recognise the ability of foreign companies to own assets in the UK, if they are not first registered in the UK?
Forfeiture? It sound like attainder!
I am saying that if a non EU company wants to own property here it may but must register at Companies House and file accounts and beneficial ownership data
And if it does not register or ceases to be registered then its property in the Uk would revert to the Crown
How hard is that to get?
OK. That is very clear. You want to confiscate the assets of foreign companies that don’t comply with your new registration or filing requirements.
Yes
And why not?
I don’t think you really need me to tell you why the state expropriating lawfully held assets without compensation is wrong.
They would not be lawfully held assets
How many times do I have to tell you that?
I have no trouble once again with your idea. It seems entirely reasonable to me that property ownership should be transparent. We have a crowded island where some people have a lot more room to live in than others, can’t be right,let alone non UK citizens using us as second homes.
But Companies House being an effective instrument in policing? You must be kidding, they can’t even do the most basic of policing in their core activities.
But I am asking for substantial extra resources for them too