Why so many properties owned by England are held abroad and why that matters

According to a study, firms registered in tax havens possess almost 138,000 properties in England and Wales, 95,000 of which are residential.

According to the Wealth Chain Project research, a collaboration between Kingston University and the charity Trust for London, properties owned by offshore firms in London are estimated to be worth ￡56 billion. The data, which cover purchases made between 1999 and 2022, are far larger than those previously published, and they were released at the same time as the government is requiring owners of property in foreign corporations to disclose their identities. So why is it important to know who owns our homes?

Why are there so many "offshore" properties?

Offshore jurisdictions, sometimes known as tax havens, are financial hubs with little or no taxes that let individuals and organisations avoid, and sometimes evade, paying tax in their home countries. A foreign corporation is free from paying capital gains tax when it purchases real estate in the UK.

Because these nations are often secretive and do not disclose a list of beneficiaries, an offshore organisation gives a buyer anonymity. These properties are not necessarily owned by "foreigners" just because they are owned by offshore corporations. Private individuals and British businesses frequently use offshore organisations to evade taxes.

These tax havens are where?

The British Crown Dependencies (Jersey, Isle of Man, and Guernsey) and the British Overseas Territories are the primary offshore locations where London property is kept, according to the research (such as the British Virgin Islands and the Cayman Islands).

Where are the properties?

Just over 42,500 of the 95,000 residential properties in England and Wales that are registered to offshore owners are in London, the majority of which are located in some of the wealthiest districts of the city. Around 15,000, or more than one in three, are in Westminster and Kensington and Chelsea.

Importantly, the campaign organisation Action on Empty Homes reports that there are a lot of vacant homes in these neighbourhoods. According to the authors of the paper, which attempts to emphasise the effect that offshore property investment has on the socioeconomic disparity in the UK, this is because the majority of these houses are bought as "a pure investment" and not to be lived in. When it comes to storing value, "London's residences are a store of value in the same manner that safety deposit boxes are," they write.

Why does this matter?

The majority of offshore financial centres are opaque and private. Criminals can use this lack of transparency as a means of money laundering. The billionaires and millionaires who use offshore services to purchase homes are a part of the global oligarch and super-rich wealthy elite.

The government raced to enact steps to "tackle corrupt elites" when the Ukraine conflict broke out, focusing on Russian oligarchs with ties to the Kremlin who use London real estate to conceal their wealth.

What new regulations exist?

Under the new Economic Crime (Transparency and Enforcement) Act 2022, foreign corporations with real estate holdings in the UK are required to register and identify their owners. Even though the register for foreign corporations just went into effect on August 1st, current businesses have until January 31st, 2023 to register. By the end of September, only about 1,000 of them had disclosed their owners.

Companies that don't follow the rules risk losing the ability to sell their homes, being fined up to ￡2,500 a day, and having their owners sentenced to up to five years in prison.

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