UK land registered to an overseas entity has long been a cause for concern for the government. Information about the owners often relate only to the entity’s name and territory. This lack of transparency has led to UK law enforcement agencies, amongst others, in calling for a public register, identifying the beneficial owners of the property owning non UK entities, to be readily available. The intended outcome of this increased transparency is a greater ability to combat money laundering.
The Department for Business, Energy & Industrial Strategy (BEIS) is intending to have an operational register available as soon as 2021, and is currently seeking views on the implementation and finer detail surrounding the draft bill, with this consultation period ending in mid-September – View consultation now.
The key point of the bill is the introduction of a regime similar to that introduced under the Companies Act 2006 for persons with significant control (PSC). Put simply, any overseas entity wishing to purchase, lease, or who already own, UK land and property, will need to both register and identify their beneficial owners.
Once registered the entity will be given an overseas entity ID, and will be entered onto the live register. The entity will then remain on this register and must provide an update to the information held on it annually, until such time they apply to be removed from the register.
Registration under the scheme is being touted as voluntary BUT, the government has made efforts to make registration fairly compulsory if the entity then wishes to do anything at all with the land/property that it has purchased.
The draft bill outlines the following as NOT possible without registration –
- The entity will be unable to register as proprietor of land in the UK
- Registration of the title to the land/property will not be possible, potentially resulting in an inability to sell/lease or create a charge over any land purchased.
To be held by the registrar of companies the register will, for the most part, be available to the public. The overseas entity will be required to prove the beneficial owners when registering them, and where it cannot provide complete information about them (after every possible step has been taken) the details of the managing officers of the company must be provided. The aim being to ensure the availability of at least some information regarding those who have day to day control of the company. Under the bill, a person is a beneficial owner if they meet the conditions outlined in schedule 1A of the Companies Act 2006, as the conditions are mirrored in this case and the entities which currently own UK land/property, will have an 18 month period in which to provide the necessary details to the registrar as part of a transitional period outlined in the draft bill.
Alongside the limitations mentioned above, criminal penalties will be enforced where there is a failure to provide the correct, up to date information annually, with penalties ranging from fines to prison sentences. The most serious breach under the regime, will be the disposal or leasing of qualifying land or property without declaring the beneficial owner, which could result in a five year jail term and unlimited fine! Failure to register and knowingly providing false information could result in up to 2 years at her majesty’s pleasure, alongside an unlimited fine.
Following on from the 2017 Criminal Finances Act, these new powers, alongside other tools such as Unexplained Wealth Orders, form part of the Anti-corruption strategy to aid in seizing proceeds of crime and identifying vehicles used for money laundering and evasion of tax, and the government is throwing whatever powers it can behind them, with recent estimates by transparency international placing over £4 billion of properties in London alone, bought with suspicious wealth.