The daughters of Azerbaijan’s president have a secret offshore company in the British Virgin Islands that was set up last year to help manage their multimillion-pound property portfolio in Britain, The Guardian reports.

Leyla and Arzu Aliyeva – who have cultivated high profiles inside and outside their home country – are shareholders in Exaltation Limited, leaked documents reveal. The company was incorporated in April 2015 with the purpose of “holding UK property”. The London law firm that set it up, Child & Child, claimed – wrongly – that the two women had no political connections.

The business interests and property portfolios of President Ilham Aliyev and his family have been the subject of extensive reporting in recent years.

These fresh revelations come amid growing concern in government that house price inflation – particularly in London – is being fuelled by rich foreign investors, who are now estimated to own more than £170bn of UK property.

Three years ago, David Cameron launched a campaign to demand more transparency about the ownership of offshore vehicles.

The network of companies used by Azerbaijan’s ruling family and their associates are set out in the Panama Papers, a leak of the database of the offshore law firm Mossack Fonseca obtained by the German newspaper Süddeutsche Zeitung. It was shared by the International Consortium of Investigative Journalists in Washington with the Guardian, the BBC and other media around the world.

President Aliyev has ruled the country since 2003. During this time his daughters have reportedly amassed vast personal business empires. They own luxury apartments in the UAE, as well as interests in telecoms and gold mining.

It was already known that Leyla Aliyeva owned a £17m mansion on Hampstead Lane in north London, next door to Kenwood House and overlooking Hampstead Heath. She is an artist and socialite, with friends said to include Prince Andrew, Lord Mandelson and Elisabeth Murdoch.

The papers show that she set up a new offshore firm at the time of her 2015 divorce from Emin Agalarov, an ethnic Azerbaijani businessman and pop star. The couple lived in Moscow and also reportedly owned a luxury penthouse overlooking Hyde Park. Aliyeva, 30, is said to prefer Britain to Russia.

Under the British government rules, Leyla and Arzu Aliyeva are classified as “PEPs” – politically exposed persons. The term encompasses anybody with links to top political leaders, including family members and close associates. It is not illegal for people classified as PEPs to own offshore businesses, but those companies are supposed to be subject to greater scrutiny and due diligence checks by banks.

However, it appears that Child & Child, the firm of London solicitors that acted on behalf of Aliyev’s daughters, did not declare their high-profile status. Asked on company formation documents in January 2015 if the two women were PEPs, Child & Child ticked “no” rather than “yes”.

It is not clear whether their status as PEPs was overlooked. The Guardian repeatedly asked Child & Child to comment but it declined to do so.

Child & Child, whose Knightsbridge office overlooks the gardens of Buckingham Palace, bought Exaltation Ltd on behalf of the Aliyev daughters from the Jersey branch of the Panamanian law firm Mossack Fonseca.

Child & Child requested nominee directors for the new company, at the cost of $550 each.

The total value of Exaltation Ltd’s assets is unclear, but is put in documents at “over $1m”. The money is said to come from “personal savings”.