Big changes for those outside the UK, looking to to buy, sell or transfer property or land in the UK.
In recent years the UK government has sought to achieve ever greater transparency in relation to the beneficial ownership of UK property (in line with the global moves towards transparency in relation to ownership within various trust and company structures). The latest UK tool in this drive for transparency, the Register of Overseas Entities, came into force on 1 August 2022, through the Economic Crime (Transparency & Enforcement) Act 2022. This now means that any overseas entity (such as a company or other organisation, that has legal personality and is governed by the law of a country or territory outside the UK) which wants to buy, transfer or sell property or land in the UK must register details of their beneficial owners or managing officers with Companies House before applying to register its purchase with the Land Registry; or indeed before dealing with matters relating to beneficial ownership.
Somewhat unusually, this will apply retrospectively to overseas entities that purchased property or land on or after:
- 1 January 1999 in England and Wales
- 8 December 2014 in Scotland
However, it will not apply retrospectively in Northern Ireland, where the legislation will only apply to overseas entities which purchase properties from 1 August 2022.
The deadline for this registration in both cases is 31 January 2023. Thus, any properties purchased through an offshore entity within the timescales above will be required to register within this deadline; in order to sell or deal with the equity/ownership.
Entities that disposed of property or land after 28 February 2022 will also need to register and give details of that disposal. This is the case even though the entity may have disposed of the UK property prior to the legislation coming into force In August 2022.
After registering, the overseas entity will get a unique Overseas Entity ID to give to the Land Registry when it buys, sells, transfers, leases or charges UK property or land. Without this ID the Land Registry will not be able to process or register any applications. There will also be penalties for failing to comply with the legislation, with fines up to £2,500 per day and the risk of up to five years imprisonment.
What needs to be reported
A beneficial owner is any individual or entity that has significant influence or control over the overseas entity. It can be:
- An individual person
- Another legal entity, such as a company
- A government or public authority
- A trustee of a trust
- A member of a firm that is not a legal person under its governing law
The beneficial owner will be an individual or entity which:
- Holds, directly or indirectly, more than 25% of the shares in the entity
- Holds, directly or indirectly, more than 25% of the voting rights in the entity
- Holds the right, directly or indirectly, to appoint or remove a majority of the board of directors of the entity
- Has the right to exercise, or actually exercises, significant influence or control over the entity
It will be necessary to report details of the overseas entity (such as the country it was formed in, its registered office and governing law) and details of the beneficial owners. Where the beneficial owners are individuals, this will include:
- Full name
- Date of birth
- Correspondence address and home address
- Date they became a beneficial owner for the overseas entity
- Nature of control
- Whether they are on the sanctions list
If there are no beneficial owners, or it has not been possible to identify all of the beneficial owners, then it is instead necessary to provide information about the overseas entity's managing officers. This is a director, manager or company secretary of the overseas entity.
Where the beneficial owners are the trustees of a trust then it is necessary to report the following information about the trust:
- Current or past beneficial owners
- Interested persons
One solace for beneficial owners is that their full details will not be publicly available and the following will be excluded from the public register (although still reportable):
- Home addresses
- Full dates of birth - only the month and year will be shown
- The agent assurance code
- The date verification checks were completed
- Information about trusts, however it may be shared with HMRC
- Email addresses
It will be necessary for a UK verified "relevant person" to verify the information provided. This "relevant person" must be an agent based in the UK who will be supervised under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017. The "relevant person" will need to provide their agent code and a statement to Companies House to confirm that the checks have been done.
If you act for an overseas entity then you should consider starting the process of collecting the relevant information about the entity and the beneficial owners, decide who will perform the verification process with Companies House and obtain the relevant consents from the beneficial owners.
It will be vital that overseas entities (and indeed their ultimate beneficial owners) to act quickly at this stage. Any delay could lead to difficulty in registering within the required January 2023 deadline (and indeed in progressing new purchases). In addition, those entities with current transactions in relation to UK property could find themselves unable to progress a transaction due to the lack of required registration.
We can provide assistance on all requirements under the Economic Crime (Transparency & Enforcement) Act 2022 and assistance with both registration and related tax, property and corporate advice.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.