New register of beneficial owners of overseas companies owning UK property
Proposed changes set to have major impact on offshore investors
In 2016 the Government announced its intention to introduce a publicly accessible register of the beneficial owners of overseas companies owning UK property or engaging in UK Government procurement.
This register would be the first of its kind in the world. The UK has already taken significant steps towards corporate transparency with the introduction last year of the "people with significant control" register (PSC register), a central, publicly accessible register of those who control UK companies and limited liability partnerships (LLPs).
The new register would apply to existing property ownership as well as to future property acquisitions. Following on from the 2016 announcement, the Department for Business, Energy & Industrial Strategy (BEIS) has now published a call for evidence on the proposals and on the impact of the new policy.
This is framed as a consultation on the design of the proposals, rather than an opportunity to revisit fundamental questions such as whether the register should be open and accessible to the public, or indeed whether the UK should have a register at all.
However, there are indications that the Government may be prepared to revisit its decision to introduce a public register, at least to some extent (e.g. to defer implementation or to amend the proposals, or both) if investors and others can demonstrate that the new disclosure regime is likely to deter legitimate investment in the UK to an unacceptable degree.
We would encourage our clients and contacts whose present or future property plans will be affected by the proposed new register, or who can otherwise provide evidence of its likely effects, to respond to the call for evidence.
The call for evidence can be found here. There are 28 questions on the design of the proposals, including:
- Question 8: Do you have any information that is relevant to our assessment of the cost and benefits of the policy to businesses, society and the economy?
- Question 9: What, if any, impact do you think that the proposed policy will have on the UK property market (residential and commercial)? Please describe the impacts and provide evidence.
The closing date for responses is 15 May 2017. Responses may be emailed to firstname.lastname@example.org with the reference Overseas Entity Register Call for Evidence response.
Scope of register and defining beneficial ownership – below we summarise the proposals put forward by BEIS:
- That the new register will be held by Companies House
- Overseas entities will not be able to buy or sell property in the UK unless they have provided information about their beneficial owners for the new register
- It will be available for anyone to view without charge on the Companies House website
- All legal entities that can hold properties will be included in its scope
- The requirements will apply in respect of freehold property and also leaseholds of more than 21 years
- The definition of "beneficial ownership" will be aligned with the definition used for the PSC register. Overseas companies will have to investigate who owns and controls them and disclose their ultimate beneficial owners – broadly speaking, the individual(s) who hold over 25% of the shares or voting rights in the entity, or otherwise exercise significant influence or control
- Overseas entities that already own property will be given a transitional year to either disclose the information, or dispose of their property
- BEIS is considering whether it should be made a criminal offence to fail to provide information for the new register or fail to keep information up to date. Whether or not a new offence is created, be in no doubt that BEIS intends to enforce compliance by preventing investors from dealing with property without providing the information required
- The information required about beneficial owners will be the same as that required for the PSC register. It will include individuals' names, nationality and country of usual residence, nature of their control over the entity and the date on which they acquired control. It will also include date of birth and residential address but these will not be publicly accessible
- Overseas entities will be required to take reasonable steps to find out the identity of the persons who control them, and to check the information with their beneficial owners before disclosing it for the new register
- There will be a protection regime allowing information about an individual to be kept off the public register if that individual would be at risk of violence or intimidation as a result of information being made public.
UK property as an investment proposition for overseas investors has been affected already by the increased taxation through SDLT, ATED, Capital Gains, tax on development profit and Inheritance Tax. These additional proposals will mean that any benefit from confidentiality of ownership will be removed.