STEP has responded to a UK government consultation that seeks views on improving transparency of land ownership involving trusts and options to widen access to trust information held on the Register of Overseas Entities (ROE).
Transparency and privacy
The extent to which information about trusts and companies should be publicly available has been much discussed both in the UK and EU, primarily in the context of the fight against money laundering and terrorist financing. STEP’s position is that the public interest must be balanced against private rights. Any interference with those rights must be proportionate and justified.
We have been encouraging the government to hold a debate about how much trust information should be made public for some time. It is vital that such information is not made public until all views are heard and properly considered.
The consultation paper explains that, notwithstanding the current consultation, the government intends to make regulations under the Economic Crime and Corporate Transparency Act 2023 that will enable members of the public to apply for access to the information about trusts held on the ROE. This information is not currently publicly available.
Pending the outcome of the consultation, STEP strongly urges the government to consider restricting access to trust information on the ROE to applicants who can demonstrate a legitimate interest. To do otherwise would, to a large extent, pre-judge the outcome of the consultation.
Ownership of land compared to other assets
The consultation is concerned solely with information about a trust that has an interest in UK land. STEP agrees that there are some characteristics relating to UK land that justify greater public access to information, including information about a trust. However, such justifications are unlikely to apply to the ownership of assets other than land.
Therefore, we believe that the level of public information about beneficial ownership of trusts that have an interest in land should be different from those that do not.
Where a trust does not own land in the UK, a member of the public would, for example, still need to show that they have a legitimate interest in applying for the information held on the Trust Registration Service (TRS) before it was disclosed.
Beneficial owners of trusts
In our response, we highlight that where trusts are concerned, the term ‘beneficial owner’ is often misleading when discussing who owns and controls land indirectly. Its meaning has evolved to determine who should be considered to have an interest in a trust for tax and compliance purposes. It is only tangentially connected to who actually exercises control or influence over a trust structure.
The people who effectively own, control or influence land via a trust structure are frequently only a small subset of all the ‘beneficial owners’ of that trust. While we support the objective to increase transparency as to who actually owns and controls land, conflating ‘beneficial owners’ with ‘owners’ and ‘controllers’ risks undermining that goal by giving a wholly inaccurate impression of who actually has ownership and control.
The consultation wording implies several times that a beneficial owner of a trust must have indirect control of any land owned by the trust. We are concerned that loose use of this terminology might cause confusion and disguise who really owns and controls land.
We do not therefore consider that information about all trust beneficiaries should be available for public inspection.
In addition, we cannot see how it is in the public interest for information about minors to be made publicly available, given that they have no ability to take ownership of the land and have no ability to influence or control decisions relating to the land. We also support a wider test to exclude information about vulnerable people (not just those who are at risk of physical harm) from being made public.
STEP’s recommendations
In our view, the main justification for the public availability of trust information where a trust has an interest in UK land is the public interest in ensuring that land is used responsibly. This is what differentiates land from other assets. The key therefore rests with those who are able to decide how the land is used (or at least influence that decision). This may sometimes include a beneficiary of the trust, but often it will not. This is consistent with the approach already taken in Scotland, which focuses on influence/control.
It follows from this that we consider that the same principles should apply both to overseas trusts and to UK trusts that have an interest in UK land.
We propose that the government’s objectives can be achieved by limiting the publicly available information about a trust to the key information about specified people connected with the trust that we have listed in our response.
We suggest that information about other beneficiaries should be available to the government and otherwise accessible only by those who can demonstrate a legitimate interest in obtaining that information. We do, however, agree that those who can demonstrate a legitimate interest should be able to search the register more easily than is currently possible.
We consider that this strikes the most appropriate balance between the public interest in transparency in relation to land and the protection of private rights. The consultation will be followed by a full impact assessment.
