Publication - Report

The land of Scotland and the common good: report

Published: 23 May 2014
Directorate:
Environment and Forestry Directorate
Part of:
Environment and climate change
ISBN:
9781784124809

The final report of the Land Reform Review Group.

263 page PDF

15.9 MB

263 page PDF

15.9 MB

Contents
The land of Scotland and the common good: report
Section 5 - Owners of Land

263 page PDF

15.9 MB

Section 5 - Owners of Land

1 In the previous section, the Review Group considered the need for an effective and efficient system for recording who owns the land in Scotland. In this Section, the Group considers whether there should be any new limits on who should be able to register a title to own land in Scotland.

2 In Scotland, as in other countries, there are legal limits as to who is entitled to own land. While owners can be either natural or legal persons, a basic requirement to hold title to land in Scotland is contractual capacity. Individuals can be excluded, for example, on the grounds of insanity, and legal persons have to have a legal identity recognised in Scots law. Thus, for example, unincorporated associations do not have sufficient legal identity and titles are therefore held in the name of their office bearers. Owners can also become disqualified from continuing to hold title (for example, a natural person who becomes insane).

3 A particular topic that is raised in the context of limiting who can own land in Scotland, is the lack of traceability and accountability of some legal bodies based overseas that own land here. While this issue has usually emerged in a specific case, it is also now part of wider concerns about the traceability and accountability of corporate bodies because of tax fraud and tax evasion.

4 The link between those wider concerns and land ownership in Scotland is illustrated by the following quote from the debate in the House of Commons in June 2013, about an EU Council resolution in May 2013 to combat "tax fraud, tax evasions and aggressive tax planning". [1]

  • Mr Ian Davidson MP: I welcome the statement from the European Council and the Government, which says that proper information on 'who really owns and controls every company' will be provided. Will the Government co-operate with the Scottish Affairs Committee in establishing who owns and controls the great landed estates in Scotland, in order that they can minimise both tax avoidance and subsidy milking?
  • The Prime Minister: That is the intention of this move. Having all countries sign up to an action plan for putting together registers of beneficial ownership by companies and the rest of it will help tax authorities to make sure that people are paying tax appropriately. That is a debate that we are leading at the G8 and in the European Union. [2]

5 Against this background, the Review Group considered whether there might be scope in Scots law to exclude certain types of overseas bodies from owning land in Scotland, in the interests of traceability and accountability. The Group recognises that, beyond the limited existing measures in Scots law, there is a clear presumption against restricting the persons who can hold land in Scotland. This results from Scotland's position within the European Union. In particular, Article 26 of the Treaty on the Functioning of the European Union ( TFEU) states:-

  • The Union shall adopt measures with the aim of establishing or ensuring the functioning of the internal market, in accordance with the relevant provisions of the Treaties.
  • The internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties.

6 The requirement in (2) for the free movement of capital includes the ability to invest in 'land' as what is known as immoveable or heritable property. Significantly, Article 63 of the TFEU also prohibits any restrictions on this movement of capital from countries outside the EU:

Within the framework of the provisions set out in this Chapter, all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited.

7 However, this general guarantee of free movement is qualified by Article 345 of the TFEU:

  • The Treaties shall in no way prejudice the rules in Member States governing the system of property ownership.

8 This qualification reflects that the EU recognises the wide scope of including third countries in the free movement of capital, and accepts that there can be legitimate national concerns for public policy or security for a member state taking protective measures on these grounds. [3] Legal cases show that such exceptions to core Treaty principles need to be narrowly construed, proportionate, transparent and subject to judicial review.

9 Within this context, the Review Group identified one potential measure that could improve the traceability and accountability of legal entities with their corporate seats in third party states outside the EU. It appears that a practical step that could be taken in Scots law, would be to make it incompetent to register title to land in the Land Register in any legal entity not registered in a member state of the EU.

10 This proposal does not appear to breach any internal EU requirements and would not bar investment by legal entities in third party countries, as they just need to set up an EU entity to own it. The change, while it would not necessarily reveal the final beneficiary owner of the EU entity, would ensure the entity is governed by EU law and that there are named Directors legally responsible and accountable for the affairs of the company. These benefits might be considered to warrant the change in the public interest.

11 The Review Group recommends that the Scottish Government should make it incompetent for any legal entity not registered in a member state of the European Union to register title to land in the Land Register of Scotland, to improve traceability and accountability in the public interest.


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