It is reported that the British government will introduce draft legislation this summer to force foreign companies to disclose their beneficial ownership if they own, or wish to buy, real property in the UK. Consultations on the proposal have already been held, and a bill has been promised for this parliamentary session, but pressure from the House of Lords has apparently brought the schedule forward.
Theresa May will set out a timetable to break the secrecy surrounding the foreign ownership of British property worth billions after facing a House of Lords defeat at the hands of two Conservative peers.
Lord Faulks, a former Tory justice minister, and Lord Hodgson have been calling on the government to establish a register exposing the beneficial owners of overseas companies and legal entities, and want it done within 12 months.
The peers put forward an amendment to the sanctions and anti-money-laundering bill, which would have been likely to inflict a government defeat.
Although ministers had provided reassurance on the issue previously, talk of a two-year consultation and no timetable raised fears of it being kicked into the long grass – spurring the potential Lords rebellion.
A government offer of a concession persuaded Faulks not to push the issue to a vote, although campaigners were critical of the government’s promised timetable.
They said a promise to table draft legislation by this summer, followed by the main bill a year later, would delay an operational register until 2021.
Rachel Davies Teka, Head of Advocacy at Transparency International UK, said: “Although I welcome a clear timetable being laid out, I am disappointed by the significant delay to primary legislation given the fact that the policy has cross party support, and has already undergone two consultations.
“The longer we have to wait for this register, the longer corrupt individuals will be able to use the UK property market to hide their wealth.”
Questions surrounding secret and offshore ownership were highlighted by revelations from the Paradise Papers, published in the Guardian, which the prime minister promised to respond to.
As well as the push on identifying the foreign entities buying up UK property, a second amendment from a cross-party group of peers calls for tougher action to reveal offshore ownership of companies based in Britain’s overseas territories.
It also follows the unprecedented Panama Papers leaks to the Guardian and other media outlets that lifted the lid on the way rich individuals and companies were exploiting offshore tax regimes.
The government is unlikely to act on the second amendment, but May’s new anti-corruption tsar, the Tory MP John Penrose, made clear that a register for property owners would be consistent with government policy.
He told the Guardian that the UK had already acted to make the foreign owners of British companies come clean, asking: “Why should foreign owners of British homes and offices be any different?”
Penrose said: “More than £122bn of property in England and Wales is owned by offshore firms. If they’re clean and reputable, fine, they’ll have nothing to fear. But if murky shell companies have bought British property with plundered or laundered cash, we don’t want them here.”
He said shedding light on “anonymous shell companies” through a register would show the world that the UK was a strong, reputable trading nation that welcomed clean investment.
Penrose said the prime minister understood that crime and corruption put the UK’s hard-won international reputation at risk and kept property prices artificially high, placing “the dream of home ownership beyond too many people’s grasp as well”.
The government had previously accepted the argument that action could help reduce money laundering in the British property market, but had so far failed to act.
A government spokesman said Penrose was “absolutely right” and stressed there had been legislation on transparency on business ownership already. “We want to get the legislation for this absolutely right, and we’re confident we will be able to provide parliament with details very soon,” he said, about the push on who is entering the British property market.
Faulks and Hodgson made clear that they were ready to push their demands to a vote on Wednesday in a move that would get cross-party backing, including from Labour, and most likely result in an embarrassing defeat.
Faulks said he had laid his amendment down because everyone knew there was a widespread problem with foreign companies or other legal entities owning large swaths of property, particularly in prime central London. He said the money used to purchase the properties often came from “very dubious sources”.
“I suppose you want to encourage foreign investment but not this sort. A way to reduce or stamp it out is a register where companies have to declare beneficial owners,” he said, arguing that a list would highlight who owned property and deter buyers involved in corruption and criminality.
Although ministers had reassured him that action would happen, there had been concerns about the timescale. He suggested movement had been too slow, with David Cameron promising action back in 2016, hence his demand for the 12-month deadline.
The second amendment on the overseas territories was laid by the crossbencher Lady Stern, and is signed by the Conservative peer and former minister Lord Kirkhope, Labour’s Lord Collins and the Liberal Democrat Lady Kramer.
Collins said the Faulks and Hodgson amendment would force a timetable on the government and be backed by Labour. He said Conservative promises on the issue stretched back to 2013 and were in the party’s election manifesto.
The Foreign Office minister Lord Ahmad has said the government does want action on the overseas territories but through “friendly cooperation” rather than imposing a set of stringent rules.