Key consultation to close shortly

In September the Scottish Government opened a 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 to show 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 in order to demonstrate transparency. The rules mainly apply to UK firms and limited liability partnerships.

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.

All those with a controlling interest 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 straightforward in a simple home ownership situation where the controlling person is most likely to be one 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.

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 noncompliance on everyone else.

Everyone in the rural sector should log on to the consultation and comment on what, if any, additional reporting burden they would want to be imposed on them. The consultation closes on December 5.