The Economic Crime (Transparency and Enforcement) Bill was initially drafted in 2018 with the intention of introducing a register of beneficial owners of overseas entities owning UK real estate.
The Bill has now come back to life with a degree of urgency, as part of a raft of measures introduced by the UK Government to target Russian oligarchs with interests in the UK. Despite these targeted intentions, the Bill has a wide reach.
The legislation imposes an obligation on overseas entities which own UK property to provide information about their ultimate beneficial owners, to be recorded in a register managed by Companies House.
Overseas entities are defined in the Bill as body corporates, partnership or other legal persons, governed by a law outside of the United Kingdom. It would seem that trusts are not covered by the definition but companies are, irrespective of whether they hold property in their own right or as nominee.
A beneficial owner is defined in the same way as a Person with significant control which is the applicable test for the corporate beneficial ownership register. Much like other registers at Companies House, this will be largely public in nature.
Once the legislation comes into effect, foreign entities will have six months to comply with the reporting requirements, and then an ongoing annual requirement to keep the information up to date. This additional level of compliance for foreign entities also comes with significant consequences for failure to comply. The UK Government has stated that failure to register the correct information could restrict the sale of the property, and result in the imposition of fines and criminal penalties of up to five years imprisonment.
With the above substantial changes being made, and the short time frame in which to comply, those who hold UK property through an overseas entity should review their current position and consider if it might be best to transfer to a different method of ownership. It is important to be aware of the likely tax implications of any steps which may be taken. We can advise on de-enveloping options and assist with the transfer of legal ownership. We can also assist clients with meeting their compliance obligations should they decide to retain their property holding structures.
Finally, in addition to these reporting requirements, it is also planned to amend the system of Unexplained Wealth Orders. The changes will increase the impact of these orders to those who own UK property through a trust, and will include administrative changes to the current regime, such as granting agencies more time to review materials.
For further information or assistance with the issues raised in this article, please contact Deborah Carrivick or Jane Johnson.
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The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at March 2022.