Thorntons is encouraging those involved in the rural sector to respond to the Transparency in land ownership in Scotland consultation and to provide their opinions on how reporting will affect them.
In September 2016 the Scottish Government opened its Consultation on Improving transparency in land ownership in Scotland: a consultation on controlling interests in land.
Although in recent years there has been publicity about the number of people who between them own a significant proportion of Scotland by area, in this post Panama Papers world the emphasis has changed to transparency of ownership in order to demonstrate compliance with various laws. These laws include wildlife crime, liability for damage, and tax fraud and evasion.
Some but not all in business already have to report on an annual basis on order to demonstrate transparency. The rules mainly apply to UK companies and Limited Liability Partnerships. It was relatively simply to add these reporting requirements to the established filing of annual returns to the Revenue and Companies House.
The Consultation proposes to extend this requirement so that in respect of all land in Scotland, reports must be made by those who are in control of the decision making and if different by those who benefit financially from and take financial risks in relation to that land.
It cannot be stressed that this affects all land in Scotland. All those with a controlling interested in an area of land (be they the owner, tenant or possibly even a manager) must report to a central register. Any changes to those persons must also be promptly reported – this might be purchase or sale, inheritance of land, change of land manager or changes in the decision making/voting in a partnership or limited company. Although this will be very straightforward in a simple home ownership situation where there controlling person is most likely to be those with a registered title, the position is far from straightforward in relation to business property. There will be a change in the controlling interest (and therefore the need to report) if for example land is included or removed from the balance sheet of partnership accounts, certain leases are granted or any lease comes to an end.
The regulations apply just as much to tenant farmers as they do to land owners. Any transfer of the tenancy would have to be reported by the new tenant. The Consultation introduces the new concept of a lease of less than 20 years duration which is “high value”. No further guidance is given. This could affect high rent residential tenancies and telecoms masts which are typically for less than 20 years but they could also affect very short term but high rent seasonal lets for potatoes, peas or daffodils. Neither the land owner nor tattie grower would appreciate each of them having to report to the central register at the start and end of the let. The reporting requirements could also fall on contractors who have Contract Farming Agreements, since in most cases they will take the financial risk on the day to day farming operations.
The Consultation recognises that this would be difficult to enforce so asks for help in identifying problems and drafting the rules. An obligation may be placed on professional advisers (lawyers and accountants in particular) to report on relevant changes which their clients make. The Consultation asks for views on whether this is appropriate – not the views of the lawyers and accountants but those whom they would be obliged to report on!
Perhaps in order to complete the Business Regulatory Impact Assessment now, details of any costs and burdens arising are sought. It is clear that there will be additional work, cost and registration dues (not to mention the inevitable penalties for non-compliance) however Scottish Government will only take this account if sufficient responses state the obvious.
This Consultation does not apply to owner occupiers of any property who will always manage and occupy their land in hand and never grant leases. It will introduce red tape, cost and potentially penalties for non compliance on everyone else.
Everyone in the rural sector should log on to the Consultation at www.gov.scot/publications/2016/09/6681 and comment on what, if any, additional reporting burden they would want to be imposed on them. The Consultation closes on 5 December 2016.
Christopher Lindley is a Partner in our specialist Land & Rural Business team. For more information on the consultation or any other agricultural matters please contact Christopher on 01738 621212, email clindley@thorntons-law.co.uk or alternatively contact a member of the Land & Rural Business team.
