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The government is introducing a ‘Register of Overseas Entities’ to crack down on foreign criminals using UK property to launder money.
Under the new Economic Crime (Transparency and Enforcement) Act, a new
Register of Overseas Entities is being created and will be held by Companies House. This new register forms part of the government’s strategy to combat economic crime, while ensuring legitimate businesses continue to see the UK as a great place to invest.
The new register will require overseas entities that own UK land or property to declare their beneficial owners or managing officers. There will be severe sanctions for those who do not comply, including restrictions on buying, selling, transferring, leasing or charging their land or property. This is to ensure criminals cannot hide behind secretive chains of shell companies, setting a global standard for transparency.
The secondary legislation confirms that the Register of Overseas Entities will be a digital service. The new register will launch on GOV.UK this summer, and entities and their agents will be required to register online.
Companies House have confirmed that the name of the overseas entity and its beneficial owners will be publicly available on the 'Find and update company information' service once the registration has been accepted. However, the secondary legislation published confirms that individuals will be able to protect their information from public disclosure under certain circumstances.
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
Who will this apply to?
Overseas entities will have to declare their beneficial owners under the Economic Crime (Transparency and Enforcement) Act if that beneficial owner:
- is a legal entity governed by the law of a country or territory outside the UK
- individuals who have significant influence or control over the entity, e.g. they hold 25% or more of the shares or voting rights (beneficial owners)
- provides trust services (acts as a trustee of a trust, or a similar legal arrangement); and
- if the provision of trust services is regulated in that country or territory by a supervisory authority
Once registered, an overseas entity ID number will be provided and the entity will be required to update its information annually, until such time as it successfully applies to be removed from the live Register of Overseas Entities.
To register title to land, an overseas entity will have to demonstrate it is registered and must comply with the duty to update information.
If a foreign company does not comply with the new obligations, its managing officers can face criminal sanctions, including fines of up to £500 per day or a prison sentence of up to five years. There will also be civil sanctions in the form of financial penalties and an overseas entity will face restrictions when trying to sell or lease their land. If they are already registered, they will face restrictions over dealing with their land.
Once the register is live, overseas entities who already own land or property in England, Wales and Scotland will be given six months to register their beneficial owners or managing officers.
Any new purchasers will need to register with Companies House from the day the register comes into effect. Overseas entities that are planning to purchase UK land or property over the summer should start planning for this requirement. Once the register is live, you will need to register with Companies House before applying to register your land purchase with one of the UK land registries.
If you have any further questions, please contact your
local Moore advisor.