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Less than a month ago, I found myself forced to return to the relatively familiar topic of foreign nationals snapping up UK property.
It’s become a semi-regular theme of debate on this ‘blog not because we’re short of subjects to consider but because Government has made non-UK residential property owners a frequent target in recent years.
As I have previously highlighted, for instance, the rule meaning that foreigners now have to pay Capital Gains Tax (CGT) on the sale of UK residences which they own will be extended to commercial property from next month.
That prompted me to question whether the fevered debate about sovereignty since the idea of a Brexit referendum was first mooted has unnecessarily heightened scrutiny of those investing in Britain who hail from beyond these shores.
Not long after the Financial Secretary to the Treasury, Mel Stride, outlined his belief that foreign property ownership was one reason for a rise in the number of rough sleep, Parliament has this week been mulling fresh action.
It follows a two-month consultation last summer on a draft piece of legislation which goes by the name of the Overseas Entities Bill.
In a nutshell, it would create a register setting out exactly who is behind any overseas entity owning UK property. Failure to abide by the new system would result in unlimited fines and up to five years in prison.
The idea for such change stems from a commitment made by former Prime Minister David Cameron at a global Anti-Corruption Summit which he hosted in London in 2016.
The Bill’s purpose is not only to counteract the threat of money laundering but, said last year’s consultation document, to “achieve greater transparency in the UK property market”.
Recent figures released by HMRC demonstrate the stake which wealthy foreign nationals have in the UK property market.
Since Brexit, the Revenue claimed, non-UK residents have bought three times as many £10 million-plus homes as before the referendum.
Added to that is research by an NGO, Global Witness, which would appear to justify the register. Working from Land Registry data, it concluded that some £100 billion of UK property was owned by companies based in tax havens, describing the state of affairs as a “scandal”.
Now, I don’t wish to adopt a different view merely as an exercise in being contrary. After all, the UK Government and its peers in other jurisdictions are right to try and stamp out money laundering wherever and however it takes place.
Nevertheless, I take issue with the idea that there should be absolute transparency for the sake of it.
I wonder, in fact, whether officialdom has simply seen a way to reduce its workload by introducing an element of compulsion into the current, social media-driven trend for circulating to complete strangers the kind of information which would once have been kept strictly private.
There are affluent individuals who are most certainly not pursuing a sinister, criminal agenda and simply choose to purchase expensive property through offshore companies out of a desire for discretion.
The principal of an offshore services provider I know has said that a slug of his business comes from the residents of certain overseas jurisdictions where public knowledge of wealth can create a real kidnap risk of family members. Worse still, where ransoms have not been paid, it has not been uncommon for that person to be posted back piece by piece to the family in Jiffy bags.
The problem of how secure the UK Government’s intended register would be has already been flagged up to members of the parliamentary committee considering the merits of the Overseas Entities Bill
Should everyone know your legitimate business or should it not remain..well…your business?
I believe that whilst the authorities should have powers enabling them to investigate wrong-doing, there should be limits. However, with information sharing between revenue authorities and law enforcement at unprecedented levels, public registers are merely political tokenism.
The danger is that if an overseas investor does not want to open up his or her personal assets up to public scrutiny (not mentioning the spicy tax rises we have already seen) then they will not invest. Of course, there is a rich seam of people in the UK who will say “good, mission accomplished!”
However, in these tumultuous times, we have to be careful. We cannot simply give people reasons not to come to the UK. We must give them reasons to come here.
Otherwise, the UK potentially could lose out in the global land grab for international wealth.
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