Offshore companies buying UK property may soon be forced to reveal their so-called “ultimate owners”, in the latest development to emerge in the wake of the Panama Papers document leak earlier this month.
Government ministers are considering adding this requirement to existing and proposed legislation on beneficial ownership declarations, according to a report in Thursday’s Guardian newspaper, as they look for ways to crack down on tax evasion and money laundering, after recent news reports based on the leak of some 11.5m documents from the Panama law firm Mossack Fonseca suggested not enough was being done.
The proposed requirement for beneficial owners of UK property to be identified “would shine a spotlight on the foreign firms that [currently] hold billions of pounds in British property without having to declare who is behind them,” the Guardian said in its report.
The paper added: “It could also require foreign companies bidding for public sector contracts to do the same”.
The development comes a day after news, also initially reported in the Guardian, that the The US Department of Justice had launched a criminal investigation into the tax avoidance claims contained in the Panama Papers leak. According to the paper, Preet Bharara, the US attorney for the Southern District of New York, wrote to the International Consortium of Investigative Journalists to ask for further information to assist with what the Guardian said he described as “a criminal investigation regarding matters to which the Panama Papers are relevant”.
As reported, the UK last week announced that it, along with four other European countries, agreed to exchange information about beneficial owners of so-called shell companies and trusts within their borders, beginning next January. Separately, the UK has legislation due to take effect in June will oblige all UK companies to reveal their ultimate owners, as it sets up a beneficial ownership registry.
The legislation outlined in the Guardian today, therefore, would basically compel foreign owners of British property to meet the same disclosure requirements as companies located onshore.
According to the Guardian, UK prime minister David Cameron is expected to announce the proposal to force foreign owners of UK property to be identified next month, at a planned global anti-corruption summit in London.
The summit will take place on 12 May.
The use of foreign companies to hide the identities of “ultimate owners” has long been criticised by tax evasion campaigners and some media organisations. One of them, the UK satirical publication, Private Eye, reported last October that overseas investors had snapped up at least £100bn of property across London during the previous six years.
The publication, which based its allegations on Land Registry data it obtained through freedom of information requests, said that two-thirds of these purchases had been made by companies registered in four jurisdictions: Jersey, Guernsey, the Isle of Man and the British Virgin Islands.
Critics have argued that the ability to use London property as a kind of “bank” in which to stash cash in secret, and enjoy capital growth without having to pay tax on it, has made it a new global “asset class” for high-net-worth individuals.