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Categorized | Property

Tax haven buyers set off property alarm

Posted on July 31, 2014

LONDON, ENGLAND - OCTOBER 08: A man hangs a property for sale sign in a shop front in Sydenham on October 8, 2013 in London, England. The Government launched their 'Help to Buy' scheme today, which is hoped will enable first time buyers who can afford only small deposits to buy a home with only a 5% deposit. (Photo by Dan Kitwood/Getty Images)©Getty

At least £122bn of property in England and Wales is held through companies in offshore tax havens where ownership is difficult to trace, a Financial Times analysis of Land Registry data has found.

The figure – more than the total value of all housing stock in Westminster and the City of London – reveals for the first time the detail of the scale of offshore property ownership in the UK. It raises concern that London property in particular has become a haven for dirty money from around the world.

    “Property is a key risk area for the UK,” says Robert Barrington, executive director of Transparency International UK. “From Abacha to Marcos and the Gaddafis, corrupt leaders have used shell companies and trusts to hide their identities and safeguard stolen fortunes, often in property.”

    Nearly two out of three of the 91,248 foreign-company owned properties in England and Wales are held via the British Virgin Islands and Channel Island structures. Just under two-thirds of the offshore-owned property by value is in Greater London, with 27 per cent in the City of Westminster. The Land Registry data do not allow a breakdown between residential and commercial property.

    When Prime Minister David Cameron last year announced that details of who owned UK-based companies would be made publicly accessible, the government highlighted the need for transparency to tackle tax evasion, money laundering and other crimes.

    Yet Land Registry records show only the owner or entity holding a property, not the ultimate owner of the company through which the asset is held.

    Transparency International has called for the introduction of a list of beneficial ownership of property to mirror the UK government’s push to reveal the owners behind British companies.

    Anti-money laundering regulations require estate agents and lawyers to carry out due diligence on those involved in property transactions, which includes making checks on beneficial ownership. But doing so can be difficult.

    “When you have a company hidden offshore, it is I think almost impossible for your average estate agent to find out what on earth is going on,” says Peter Bolton King, global residential director at Rics. “You have to make a professional judgment whether you are satisfied with the information that you are provided with.”

    During the 2011 Libyan revolution, it emerged that the late Libyan dictator Muammer Gaddafi’s son Saadi owned a £10m London mansion through an offshore vehicle. Many of London’s “trophy houses”, including Witanhurst, a 65-room mansion overlooking Hampstead Heath, are owned by offshore companies whose ultimate owners are hidden. Witanhurst is registered to Safran Holdings, an offshore company registered in the British Virgin Islands.

    You have to make a professional judgment whether you are satisfied with the information that you are provided with

    – Peter Bolton King, global residential director at Rics

    Besides offering privacy to individuals and companies, BVI and the Channel Islands are attractive because of their tax regimes, and because of their strong ties with London’s banking and business community and their robust judicial systems. The 128 jurisdictions of choice for property investors include more unusual ones such as Iran and Niue, the tiny South Pacific island nation.

    A Land Registry official said there were no plans to introduce a register of beneficial ownership of property and that it would be “misleading to suggest that registering land or property in a company name amounts to allowing individuals to conceal information on the register for illicit purpose”.

    The total value of offshore ownership of property is likely to be considerably higher than £122bn. Limitations on how the Land Registry holds the data mean the true picture is difficult to ascertain. More than a third of the data provided by the Land Registry do not contain a purchase price. The Land Registry does not capture price information when properties change hands through the purchase of an offshore corporate vehicle for example.

    Additional reporting by Kate Allen

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