The recently enacted Economic Crime (Transparency and Enforcement) Act 2022 introduces a new requirement for overseas entities owning UK residential and commercial property (freehold or leasehold) and land to register at Companies House and provide details of beneficial ownership which will be held on a public register. There are 93,877 properties listed on the UK Land Registry currently owned through overseas entities which will be required to comply with the new legislation.
The newly introduced registration requirement will apply to:
• any company or similar legal entity governed by the law of a country or territory outside the UK; and
• individuals who have significant influence or control over the entity or those who hold 25% or more of the shares or voting rights or have the right to appoint or remove a majority of the board of directors.
Non-UK trusts that own land directly will not be caught by the registration requirements, however the make-up of each particular asset holding structure will mean there are exceptions.
Once registered, an overseas entity ID number will be issued and the entity will be required to update its information annually.
The requirement to register will apply retrospectively to land acquired on or after 1 January 1999 in England and Wales and those affected will need to join the Companies House register within six months of the rules coming into force. If a sale occurs after 28 February 2022 but before a company is registered the selling entity still has an obligation to register with Companies House by the end of the transition period.
Failure to register will be a criminal offence and the officers of the entity could face up to five years in jail. Failure of beneficial owners to supply information is also a criminal offence. Lack of compliance will also prevent the entity from being able to buy or sell UK property in the future. A transfer of land in breach of the registration requirement would amount to a criminal offence on both the entity and its responsible officers.
This legislation represents a significant development and officers of entities affected by these new rules will need to consider their new duties carefully. Steps should be taken to identify any UK land held within a structure, determine whether it is held directly or indirectly by an overseas entity and the relevant information gathered ready for reporting.
The date in which the main provisions of the Act will come into force are yet to be announced and further guidance will be issued once a date has been released.
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Please note: ILS World does not offer tax advice and would therefore recommend you obtain your own tax advice. If you require an introduction to a tax adviser, we would be happy to assist.