Hidden Ownership of Real Estate in the UK: The Route to Transparency

Symposium on Financial Secrecy

February 21, 2024

Arun Advani (Warwick), César Poux (LSE) and Andy Summers (LSE)

International

Inequalities Institute

I. Offshore (corporate) ownership of UK real estate

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What are we talking about?

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What are they used for?

• Limiting corporate or individual tax liability (e.g. stamp duty, inheritance tax).
• Many loopholes, particularly for individuals, have been closed in the past 10 years

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• Obscuring ownership
• Privacy reasons
• High risk of financial crime, money laundering, or sanction evasion.

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• Tax evasion
• Real estate assets not covered by international agreements on exchange of information (CRS and AEOI)

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Incorporated in tax havens

• 152,000 properties were owned by foreign companies in 2023, including 92% incorporated in a tax haven

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Source: Authors’ calculations based on Land Registry’s OCOD database

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Concentrated in high-end properties

Source: Authors’ calculations based on Land Registry’s OCOD database

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Concentrated in central London

Source: Authors’ calculations based on Land Registry’s OCOD database

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‘Round-tripping’: Half of registered beneficial owners are UK residents and/or nationals

Source: Authors’ calculations based on Land Registry’s OCOD database and Companies House ROE

II. Evaluating current transparency efforts

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The Register of Overseas Entities

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• Voted in March 2022 (following Russian invasion) registration deadline January 2023
• Companies owning UK property must register beneficial ownership information or face fines (up to £2500/day) and asset freezes
• As of December 2024, 30,000 companies have registered with Companies House (up from 20,000 in February 2023)

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• The Economic Crime and Corporate Transparency Act (ECCTA), which received royal assent in October 2023 closed some but not all of the loopholes in the original regime

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• Based on analysis conducted with Anna Powell-Smith (Centre for Public Data)
• For 71% of the properties registered to an overseas entity, essential information about their beneficial owners remains missing or publicly inaccessible despite the ROE.

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• In over 33% of cases this information is also missing for law enforcement
• 10% of all properties (15,000 properties) cannot be matched with any record in the ROE
• 10% report no beneficial owners
• The rest is due to various loopholes, which we document and quantify.

Gaps in the ROE

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Main parties to a trust

“Settlor”

• Establishes the trust
• Provides the funds
• Reported but withheld from public register
• (And sometimes not reported at all)

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“Trustee”

• Legal owner
• Manages trust assets
• Reported on register

“Beneficiary”

• Beneficial owner
• Benefits from trust assets
• Reported but withheld from public register
• (And sometimes not reported at all)

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Almost half of properties are owned by entities involved in trust structures

• 45% of properties include trust structure
• 12% held by OE acting as trustee (700 OEs)
• 33% held by OE owned by RBO acting as trustee (5,800 OEs)

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• Trusts structures mean that information publicly reported is on manager of the land, rather than the ultimate beneficial owner.

III. The way forward

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The push for transparency, in the UK and elsewhere

• International push for transparency: US Corporate Transparency Act; EU Anti-Money Laundering (AML) initiatives
• In the UK:
• Corporate ownership and control: PSC Register 2016
• Land ownership: ROE 2023
• Trusts as a new frontier: the trust consultation

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• Adapting the transparency framework to trust structures

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Our view: the parity principle

• Currently, different levels of transparency apply depending on how UK land or companies are held
• Our view: holding structure should not affect nature or level of transparency at all
• Distinctions should only be based on:
• Asset-type (e.g. UK land, UK company, foreign company supplying UK government, etc)
• Characteristics of owner(s) (e.g. protecting vulnerable individuals)
• Otherwise, expect exploitation of the ownership structure to avoid transparency requirements