In April 2017, the government announced for a call for evidence to gauge interest in and support for further transparency on the issue of overseas ownership of UK property. This new proposed Register of Beneficial Owners of Overseas Companies and Other Legal Entities will detail who owns and controls the overseas companies and legal entities that already own UK property, want to buy property in the UK, or bid for jobs through UK government procurement.
A primary objective of the proposed register is to create greater transparency and foster “confidence and trust” in the businesses with which the UK does business, but the fight against “dirty” money is another motivating factor that is certainly of great interest in Europe.
In 2016, the UK became the first G20 country to introduce a publicly accessible register of beneficial ownership called the People with Significant Control (PSC) register. This gives the public and investigatory bodies—HMRC and the crime agencies for instance—instant access to a central record of information about who really owns and controls UK companies.
But while the PSC register makes it possible to trace the true owners of registered properties owned by companies incorporated in the UK, the same does not apply for companies incorporated outside the UK. The new register intends to close this loop a bit tighter, squeezing out dirty investors and attracting honest investors to the UK property market.
As the register will be the first of its kind in the world, there seems to be a hope that other countries will follow the UK’s lead. The register’s suite of motivations seems reasonable in fact: enhancing the “already strong reputation of the UK as an honest and trusted place to do business”; raising standards worldwide; combating money laundering, the financing of terrorism, and tax evasion.
There are 28 questions posed in the Beneficial Ownership Proposal, with these the government hopes to build evidence to support carefully thought out new legislation that will attract and not deter investors to Britain and not ruin the country’s reputation as an open economy that benefits greatly from foreign companies looking to do business here.
The evidence will help build requirements that are both workable and proportionate, to enable government policymakers to “test and refine our proposals to strike the right balance”.
What will being on the Register of Beneficial Owners of Overseas Companies and Other Legal Entities entail?
The new measures propose requiring disclosures from foreign companies wishing to buy relevant property in the UK for the first time and companies that already own relevant UK property. Relevant property includes freeholds and leaseholds with an original lease term of more than 21 years. The policy will also extend to other forms of legal entity that can hold property.
A registration number will be required before the entity is able to buy, sell, create a lease, or create a legal charge over relevant property; and the company will be required to lodge certain information regarding the identity of its beneficial owners before it can register.
The compliance process is likely to be similar to the measures put in place for the PSC register for UK-incorporated companies and will probably kick up similar issues regards the loss of personal confidentiality and associated security concerns. The government is very keen not to deter honest companies from investing in the UK.
To conclude, this call for evidence includes:
Striking the right balance between enhancing the UK’s reputation as an open and trusted place to do business while devising a set of workable and proportionate rules that don’t detract foreign investors and also trying to “lead the world” on anti-money laundering, terrorism and corrupt investors, now that’s a tall order.
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Sumit Agarwal Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.
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