In a bid to make the property market more transparent, the Government has fast-tracked a new public register. The Register of Overseas Entities is a database which will hold details of the ‘beneficial owners’ – that is, the actual owners – of property in the UK. Companies will not be able to disguise ownership through non-disclosure if they wish to own, buy, sell or transfer property or land in the UK. The measure aims to crack down on money laundering and was spearheaded by the UK government through the new Economic Crime (Transparency and Enforcement) Act 2022. This was rushed through Parliament following Russia’s invasion of Ukraine amid concerns that secretive ownership of UK property would be exploited by oligarchs. However, this will affect many UK organisations, especially those with overseas owners.
Who classifies as an Overseas Entity?
Overseas owners fall into two broad classifications. Firstly, an Overseas Entity is any company or organisation that has legal personality and is governed by the law of a country or territory outside the UK. Following on from this, a beneficial owner is any individual or entity that has significant control or influence over the overseas entity, holds more than 25% of the shares or voting rights, or holds the right to appoint or remove a majority of the board of directors.
Thus, a beneficial owner can be an individual, a trustee of a trust or even a member of the firm which holds the property. If there are no beneficial owners, then checks will be carried out on the overseas entities’ director, managing officer or company secretary.
After registration, the entity will get a unique Overseas Entity ID to give to the land registry when it buys, sells, transfers, leases or charges UK property or land. Effective from the 1st August 2022 throughout the UK, it also retrospectively applies as far back as 1999 for England and Wales, and 2014 in Scotland.
Impact and Penalties
Penalties for non-compliance are high, with fines of £2500 per day or up to five years in prison, as well as restrictions on any future land or property transactions. The government has proposed a 6-month window to compile the register, and once successfully registered, the overseas entity has a duty to update their information on an annual basis. Whilst there have been concerns about loopholes raised by the Chartered Institution of Taxation, the Government insists that the Act and the Register are robust, with significant regulation-making powers in place to close any loopholes as they arise.
Fortunately, the legal team at Counterculture is well-placed to help existing or new clients through the registration process. If you have any concerns about how your property portfolio or future plans are affected by the new rules, please get in touch and we will be able to guide you through every step of the process.
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