New Bill sets out to record all foreign entity owners of UK property

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Properties in the UK owned through a foreign entity will soon need to register their beneficial ownership in a “Register of Overseas Entities” under the Economic Crime (Transparency and Enforcement) legislation currently going through Parliament.

The Government has just published the draft of the Economic Crime (Transparency and Enforcement) Bill together with a factsheet. The legislation will introduce a new register which will record all beneficial ownerships. It is thought the new register will have a significant impact on both residential and commercial property transactions in the UK.

Although the factsheet is applicable in England and Wales, the legislation is to apply across the UK, with some minor differences for Scotland and Northern Ireland.

As the Factsheet says, The ‘Register of Overseas Entities’ will:

• provide more information for law enforcement to help them to track down those using UK property as a money laundering vehicle
• require anonymous foreign owners of UK property to reveal their real identity to ensure criminals can’t hide behind secretive chains of shell companies
• level the playing field with property owned by UK companies, who already need to disclose their beneficial owners to Companies House
• impose sanctions for non-compliance, including restrictions on registering or disposing the title of the land
• apply retrospectively to property bought since January 1999 in England and Wales and since December 2014 in Scotland.

The Bill is designed to tackle “dirty money” in the UK property market and will go a long way in strengthening of powers of the Unexplained Wealth Orders. For the first time there will be a public register of the beneficial owners of overseas entities that own land in the UK. It will affect all foreign and UK property owners who hold their properties through overseas entities. The government estimates that this will affect around £170 billion worth of UK property which is currently held through overseas vehicles, a measure that will eventually affect thousands of investors.

The Register

The proposed register will involve all future acquisitions and interests in UK land, and also any overseas ownership in England and Wales acquired since 1 January 1999, while in Scotland that which was acquired since 2014.

To register, owners will be required to submit information about the overseas entity to Companies House. Informations such as details of ownership or when held by a company, details of incorporation, such a company’s beneficial owners and directors. There will also requirement inform companies house of any changes and keep the information in the register up-to-date.

A beneficial owner is any person who holds more than 25% of the shares or voting rights in an overseas company (either directly or indirectly), or someone who exercises significant control over the company.

A qualifying property for the register will be any freehold property, or a lease of greater than seven and an overseas entity is defined as any entity that is governed by the law of a country or territory outside the UK.

Once the information has been provided to Companies House for registration, the overseas entity will be provided with an “overseas entity ID” number. The information listed on the register will be publicly accessible, except in the case of personal details such as dates of birth and residential addresses.

Criminal offence

Failure to comply with the future registration legislation will result in restrictions on the ability to sell the property in question. Any dispose of a property identified as being held by an overseas entity would result in a breach of the law and may amount to a criminal offence punishable by up to five years in jail.

Companies House will be the registrant body for the scheme. Details were included in a White Paper published on 28 February 2022 which sets out plans to upgrade company registrations as well. This will include improved checks on identification for anyone setting up, running, owning or controlling a limited company in the UK.

The government says that the forthcoming legislation represents a significant step forward in the security and transparency around the ownership of UK property, as well as the tightening up on the transparency and identity of exactly who sets-up UK company registrations.

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