In March, the UK government introduced a new Economic Crime (Transparency and Enforcement) Act. Under the Act, a Register of Overseas Entities will be created and maintained by the Companies House. The development is part of the government’s strategy to combat money laundering and economic crime. The Act will also promote the UK as an ideal location for legitimate businesses to invest and continue their operations.
How Does The Register Work?
The government are looking to put a stop to foreign criminals who use UK property to launder money. This is a serious economic crime that causes harm to society by creating distorted real estate prices, unfair competition, as well as having a negative impact of legitimate direct foreign investment.
The ‘Register of Overseas Entities’ will:
- Provide more information for law enforcement so they can track down those using property as a money laundering vehicle.
- Require anonymous foreign owners of property to identify themselves. This will ensure criminals can’t hide behind secretive chains of shell companies.
- Create a level playing field with property owned by UK companies, who already need to disclose their beneficial owners to Companies House.
- Impose sanctions for non-compliance as well as introduce restrictions on registering or disposing of the title of the land.
- Apply in retrospect to property bought as far back as January 1999 in England and Wales and since December 2014 in Scotland.
Process For Foreign Entities Who Possess UK Property
If a foreign entity owns or wishes to own land in the UK, it must first identify and register its beneficial owner(s) with the Register of Overseas Entities. The supplied information will need to be verified by the Companies House.
Once registered, an ID number will be assigned to the overseas entity, and it will be required to update its information annually. An entity will remain on the Register of Overseas Entities until such a time that it successfully applies to be removed.
To register a title to land, an overseas entity will be required to demonstrate that it is registered and complies with the duty to update information.
Who Needs To File With The Register?
Any foreign owners of UK property, including any company or legal entity that is registered outside of the UK, will need to file with the ‘Register of Overseas Entities’. This also applies to any individuals who have significant control over an overseas entity that owns UK property. Also known as a beneficial owner, someone with significant control holds 25% or more of the entity’s shares or voting rights.
Consequences Of Non-Compliance
There will be major penalties for non-compliance with the Register of Overseas Entities. The managing officers of a foreign company who does not comply with the new obligations will face criminal sanctions with fines up to GBP 500 per day or up to 5 years in prison. There will also be financial penalties and restrictions when the overseas entity tries to sell or lease its land.
Conclusion
If you are involved with any foreign entity operating or owning land in the UK and need assistance with your compliance obligations, please contact the experts at IBCF. We will assign a local UK compliance officer to run an audit and advise of any outstanding obligations.
Please Contact Us for additional information