By Stephen Cartwright, Trainee Solicitor at Mackrell Turner Garrett Solicitors:
The Department for Business, Energy and Industrial Strategy (“BEIS”) have recently published the draft Registration of Overseas Entities Bill (“ROE” or “the Bill”). The draft sets out provisions to establish beneficial ownership registers for overseas entities who wish to own, have a beneficial interest in, let or dispose of a property in the UK.
The ROE is a reaction to the widespread concern expressed from the public about the lack of transparency in the UK property market and long-standing money laundering concerns that the UK market is being used by criminals to invest their proceeds of crime.
Who will be affected?
Clearly the main impact of this will be felt by those who directly use overseas entities, for commercial or tax reasons or otherwise, when purchasing a property. As a result, this will likely be felt by High Net Worth Individuals (“HNWI”) who on the advice of their professional advisers tend to use legal entities incorporated in ‘off shore jurisdictions’ as the vehicle to purchase properties.
Further, professional advisers will also need to be aware of the ROE (e.g. tax lawyers, tax advisers, accountants and property lawyers). Undoubtedly this will need to form part of their advice to their clients who wish to remain ‘behind the scenes’. Lastly, and it goes without say, this will have a direct impact on estate agents as they will need to determine the beneficial ownership when dealing with transactions in the UK.
What are the requirements?
The Bill will require overseas entities who, for example, wish to purchase a property in the UK to firstly register as a ‘Registered Overseas Entity’ at Companies House and identify and register its beneficial owner.
This, like the Persons with Significant Control regime which was introduced in 2016, will require an ongoing obligation to update Companies House of any change to the beneficial owner or confirm that there is no change on a yearly basis.
An overseas entity is any legal entity governed by the law of a country or territory outside the UK and includes, for example, body corporates and partnerships etc.
Offences
Of course, there are offences for non-compliance with the ROE. The most serious offence occurs if an entity disposes of property in breach of any imposed restriction on a property. For example, if an overseas entity fails to register at Companies House, a restriction will be placed on the said property. If a person is found guilty then they will be liable to a fine and/or up to 5 years’ imprisonment. Those who knowingly or recklessly provide false or deceptive information may be subject to a fine and/or up to 2 years’ imprisonment.
Next steps
The Bill is currently in draft and any responses are welcomed by 17 September 2018. If you have any questions about the ROE, please feel free to contact the team at Mackrell Turner Garrett Solicitors.