With the twin distractions of Brexit and Covid, however, the plan was put on hold and it is only now with the Government under pressure to take action against Russian oligarchs that the details are being put before Parliament as part of the Economic Crime (Transparency and Enforcement) Bill 2022. Given a stated intention to “proceed at pace”, it is expected that the register will be up and running within a few months.
The register will apply to “overseas entities” - defined as bodies corporate, partnerships or other entities that are governed by the law of a country or territory outside the UK and that are legal persons under that law. This clearly includes non-UK companies and partnerships; it appears that foreign trusts will fall outside of this definition but that foundations will be caught. The register will be retrospective in that it will apply to land purchased since 1 January 1999. The overseas entity will be required to identify its beneficial owners, to register with Companies House, and to update and confirm the position each year. Failure to comply may result in fines or prison sentences, but perhaps more significantly registration will be a prerequisite for recognition of proper title by the Land Registry.
The “Registrable Beneficial Owner” of a legal entity is defined as a person or entity that holds at least 25% of the shares or at least 25% of the voting rights, has the right to appoint or remove a majority of the board of directors, or has the right to exercise or actually exercises significant control or influence over the entity. In the case of an overseas entity owned by a trust this is extended to someone who has the right to exercise or actually exercises significant control or influence over the trust.
Those who are likely to be required to register, particularly those responsible for the administration of multiple entities, may want to start putting together the information they will need. They may also want to consider the extent to which HMRC might use the information on the register and whether it might be appropriate to review their historic compliance with UK tax legislation. It should be borne in mind that at various points over the last twenty years there has been an extension of Capital Gains Tax to catch the disposal by non-residents of various categories of UK real estate and that Inheritance Tax has been extended to catch certain indirect holdings of residential property as well as directly-held UK real estate in general. The register may also enable HMRC to identify purchases of property where there has been avoidance of SDLT.
The Economic Crime (Transparency and Enforcement) Bill 2022 is currently passing through Parliament. It may be subject to amendment and certain points may only be clarified when the register is in place. The above reflects our understanding of the Government’s proposals as currently expressed.
The next steps
If you have any concerns regarding the register and its implications, or historic tax compliance, please speak to your usual UHY adviser or contact us via our online form.
