WORKSTREAM I: DEFINING CONTROLLING INTEREST
This workstream relates to the approach to be taken in the regulations to defining a "controlling interest". It sets out the current position on transparency of land ownership in Scotland, the purpose of the regulations, and the types of companies, individuals and other bodies who can be considered to have controlling interests in land owners and tenants in Scotland.
It seeks views on the key considerations which Scottish Ministers and the Scottish Parliament should take into account in defining a "controlling interest".
Chapter 1: Transparency of land ownership and controlling interests in Scotland
Information currently available in the property registers
1. Secure, reliable and accessible information about who owns land is held to be fundamental to the operation of modern market economies across the world. In Scotland, we have a long history of public registration of rights in land. The General Register of Sasines,  Scotland's original national register of property deeds, dates back to 1617. In 1981, the map-based Land Register of Scotland ("the Land Register")  began to be rolled out across Scotland. These registers have ensured that information about the owner of a right in land is publicly available. Registration is a means of publicising a sale but is also the final and essential part of the transaction ensuring the purchaser's right of ownership is made real and enforceable against third parties.
2. As a result of the current arrangements, all but a very small number of properties - typically those which have not changed hands in over 400 years  - will appear in one of the two property registers maintained by the Keeper of the Registers for Scotland. An example of a Land Register Title Sheet and a Register of Sasines search sheet are included in annexes A and B respectively. These examples show that the Land Register contains a map of the property and other information including details of the registered proprietor. In the Register of Sasines, the search sheet for each property provides details about recorded deeds, including the grantee, but anyone looking for further information would need to look at the deeds themselves to understand the extent of the landholding.
3. The registered proprietor in a Land Register title, or the named grantee in a recorded deed, is the "legal owner" of the property in question. The legal owner can either be a natural person (i.e. a private individual who owns property in his or her own name) or a legal person (for instance a legal entity such as a company which owns the property in its own name).
4. There are currently some 1.6 million property titles on the Land Register, which represents about 60% of all the potential property titles in Scotland (or approximately 29% of the Scottish land mass). A further 1.1 million property titles (accounting for approximately 71 % of land mass) remain in the Register of Sasines. Information about accessing these property registers can be found on the Registers of Scotland website. 
Completion of the Land Register
5. In May 2014 Scottish Ministers invited the Keeper to complete the Land Register by 2024, with all publicly owned land to be on the Land Register by 2019. Registers of Scotland are currently working on a number of fronts to enable these targets to be met. There are now three routes for properties to move from the Register of Sasines to the Land Register. These are:
i. "triggers" following market activity such as sales and re-mortgages,
ii. voluntary requests for registration; and
iii. the Keeper's statutory power to move property titles from the Register of Sasines to the Land Register (known as Keeper-induced registration).
6. We expect that a large proportion of Scotland's land mass will be registered through voluntary registration by private and public sector owners. Initial work using Keeper-induced registration will focus on registering residential properties where Registers of Scotland has already undertaken background work (c. 700,000 titles). Over the next few years, this will increase title coverage significantly. Further information on this is available on the Registers of Scotland website  .
7. In October 2015, the then Deputy First Minister and Cabinet Secretary for Finance, Constitution and Economy asked the Keeper to take forward the ScotLIS project to enable quick and easy access to information about any piece of land or property in Scotland through a single online source. The need to increase transparency about land ownership is a key driver for the ScotLIS project, which will also support and improve the efficiency of property market transactions.
8. Registers of Scotland is working with stakeholders to undertake scoping and development work on ScotLIS and the first phase of this work is due to be launched in October 2017. This will focus on data from Registers of Scotland and other public authorities that identify title to property and supports property market transactions. Subsequent phases will enable the sharing and linking of further layers of data from a wide range of public sources. Further information about ScotLIS is available on the Registers of Scotland website  .
The additional information that these regulations should disclose
9. The calls for greater transparency of land ownership in Scotland have increased in recent years. The provisions in the Land Reform (Scotland) Act 2016 and the debate on transparency had their origins in the report in 2014 of the Land Reform Review Group " The Land of Scotland and the Common Good"  . The recommendations on transparency from the Land Reform Review Group and the development of policy on transparency of land ownership to date have been driven by concern over the potential for legal entities, such as companies, and arrangements such as the creation of trusts that - in some circumstances - may be used to obscure or hide the identity of persons with controlling interests in land owners and tenants.
10. In response to this concern section 39(1) of the Land Reform (Scotland) Act 2016 provides for regulations to make provision requiring information to be provided about persons with controlling interests in land owners and tenants.
11. The Land Register and the Register of Sasines, already contain details about the legal owners of land in Scotland. The legal owner's name and designation is set out in the title sheet or in the relevant search sheet in the Register of Sasines. Under present arrangements it is often the case that the legal owner of the land who may also control the decision-making in relation to the land, or indeed any other person who may have a form of controlling interest in that land owner, is willing to engage with communities and others who have an interest in the land or the activities conducted by the land owner. Where this is the case land owners and local communities work together in a collaborative manner with no further assistance required by legislation.
12. In other situations there may be persons who are not the legal owners of the land yet have controlling interests in land owners and tenants. This could be the case where the legal owner is either a legal person or a natural person. For instance, the land may be owned by a natural person and that person may not have control of decisions taken relating to the land. Alternatively, the land could be owned by a legal person and it could be unclear from information currently available as to the identity of the persons with control of the owner or tenant.
13. An example could be where the land owner is a natural person who is a partner in a partnership, and the land in question is an asset within the partnership, or indeed is an asset of a company. It is also possible that land could be owned in the name of a natural person, but that person is a trustee in a trust arrangement and is bound to control the land in accordance with the terms of a trust agreement.
14. Some titles are held by a legal person, such as by a company. It may be possible to obtain more information about who is in control of a UK company by looking at the Companies Register  . This Register will reveal the identity of the director, or directors of the company. It is usually the case that it is the directors who would be making the decisions in relation to land. However in some instances shareholders can indirectly influence decision-making within companies given that if they have sufficient voting rights they can change the directors.
15. To ensure greater transparency about the underlying beneficial owners of UK companies that own land in the UK or into public procurement contracts the Small Business, Enterprise and Employment Act 2015  amends the Companies Act 2006 to place a new duty on UK companies to hold a register of people with significant control ( PSC). From 6 April 2016, UK companies have been required to keep their own register of PSCs. Since 30 June 2016, UK companies have been required to supply this new information to Companies House alongside the annual confirmation statement of the company's records. By June 2017, Companies House will hold PSC information for most UK incorporated companies and this information will be made available in a public register. There are also obligations placed upon companies to make this information available on request.
16. However, it is more difficult to obtain this information for companies incorporated outside the UK. To address these difficulties, the then UK Government Department for Business, Innovation and Skills published a discussion document "Enhancing transparency of beneficial ownership information of foreign companies undertaking certain economic activities in the United Kingdom" in March 2016  . The Department for Business, Energy and Industrial Strategy is currently analysing responses and intends to publish a further call for evidence in the near future.
17. It can also be difficult to discover who controls land held by trustees in a trust arrangement or by trustees on behalf of a partnership because this information is contained in trust deeds or a partnership agreement that may not be in the public domain. Moreover, they are not caught by PSC requirements. Such partnerships and trusts could be formed and governed by Scots Law. However, land in Scotland could be held by a partnership, trust or similar legal mechanism constituted in another jurisdiction.
What information about persons with significant control in land owners and tenants may deliver
18. The main reason for seeking to obtain more information about persons with controlling interests in land owners and tenants is to improve transparency about the identity of the individuals who are taking decisions in matters relating to land in Scotland. The Scottish Government is keen to ensure that land in Scotland is sustainably owned, used and developed in the interests of land owners, communities and wider society. Improved information about who controls land owners and tenants in Scotland will therefore help empower people, including community groups, and give them the opportunity to understand who is in control of land owners and tenants. This transparency should also allow people to engage constructively with any person with a controlling interest who makes decisions in relation to land that might have an impact on sustainable development.
19. There are a number of other reasons why individuals or groups might wish to improve the transparency of land ownership in Scotland. The ability to trace a person with a controlling interest will potentially be helpful in situations where there have been difficulties in tracing the legal owner of the land. The potential benefits here could include assisting in identifying the perpetrators of wildlife crime, identifying land owners to ask them to cut down trees where they are reducing a line of sight and causing danger at the side of a road, or in an action seeking damages after an injury is suffered by an individual on an area of land. Access to this information could also assist local authorities where they wish to exercise their compulsory purchase powers or in exercising enforcement action, for example in relation to a dangerous building. This information may also help other public bodies, such as the Scottish Environment Protection Agency, in carrying out enforcement functions, for instance in relation to taking action on unlicensed landfill sites.
20. It has also been suggested that improving the transparency of land ownership in Scotland could help to address tax fraud and evasion. The Scottish and UK Governments share a common interest in increasing the transparency of land ownership. However the regulations laid before the Scottish Parliament and their underpinning rationale must be within the devolved competence of Scottish Ministers. The proposed regulations cannot therefore have a taxation purpose which is reserved to the UK Parliament, such as capital gains tax, inheritance tax and corporation tax. Nor can the purpose relate to a reserved matter such as money laundering regulation .
21. The Scottish Parliament has legislative competence (and Scottish Ministers devolved competence) in relation to certain taxes, some of which are relevant to land. In particular, land is liable for non-domestic rates (subject to statutory exemptions such as for agriculture) collected by local authorities and Scottish Ministers introduced a Land and Buildings Transaction Tax ( LBTT) in Scotland on 1 April 2015 that replaced Stamp Duty Land Tax. Increased transparency regarding land ownership may assist Revenue Scotland, the tax authority responsible for the administration and collection of Scotland's devolved taxes, in carrying out its compliance function with regard to LBTT. Looking ahead the availability of more comprehensive information in this area could also assist the development of new policies and reform in areas of devolved responsibility, including further land reform.
22. The regulation making power in section 39 of the Land Reform (Scotland) Act 2016 enables Scottish Ministers to make provision to increase the transparency of land owners and tenants and, as a result, improve the accountability of land owners to the people of Scotland.
QUESTION 1 - Do you have any comments about making information about persons with controlling interests in owners and tenants of land available?
Email: Stephen Krzyzanowski, LandReform@gov.scot