Background
According to HM Land Registry data in 2022 around 250,000 homes in England and Wales were owned by overseas nationals with another 92, 640 properties being owned by overseas entities – valued in the region of well over £97 billion.
Property is not immune from the estimated £100 billion of criminal proceeds channelled through the UK. Transparency International UK’s research previously identified more than £6.7 billion worth of UK property bought with “suspect” wealth.
What has compulsory registration revealed so far?
We are about two months past the deadline of the 31 January 2023 imposed by the Economic Crime (Transparency and Enforcement) Act 2022 (the “ECTAE 2022”), so there will be more to follow, but the UK Government has started to see some results. Billionaires, business figures, Conservative donors and Gulf Royals are amongst those identified as overseas beneficial owners of UK property.
Research from Transparency International UK suggests that almost 52,000 UK properties are still owned anonymously despite the requirements of ECTAE 2022. It is thought that the owners have either; ignored the law altogether, do not know about the new legal requirements, exploited loop holes or submitted information which makes it impossible for the public to find out who ultimately owns them.
Organisations are already calling on the Government and Companies House to put in further measures and close any loop-holes if the aims of ECTAE 2022 are to be realised.
What happens if you missed the deadline?
Companies House made no announcement to extend the registration deadline beyond 31 January 2023.
Failure to register has been recognised as a possibility by the Chief Registrar of HM Land Registry. The ECTAE Act 2022 placed a duty on HM Land Registry to enter a restriction in the register of a qualifying property, if the registrar is satisfied that an overseas entity is registered as proprietor of the estate and became registered as the proprietor in pursuance of an application made on or after 1 January 1999, even if it failed to register with Companies House. The effect of this restriction is to prohibit the registration of any sale or disposal of the relevant property.
Whilst penalties and possible prison sentences for non-compliance are very much a threat, Companies House is prepared to take into consideration evidence of genuine attempts to comply with the registration obligation, such as appointing a UK regulated agent to verify and submit an application.
Companies House goes a step further on its website by providing tips to overseas owners on how best to ensure an application is submitted correctly. 3 out of 10 filings were rejected, often because the information provided by the overseas entity (making the application directly) did not match the information provided by the agent.
Why is it important to comply if you have not already done so?
Until registered, an overseas entity is technically breaking the law and that comes with consequences as mentioned above. In addition, an overseas entity has a duty to ensure that the information they have submitted to the registrar remains accurate at all times. Any changes will need to be reported, at least annually. Failure to comply will result in penalties.
Overseas owners unable to properly dispose of their legal titles in property, may be tempted to dispose in other ways. Would be purchasers and new tenants should be cautious. Transferring a deposit, completion monies or receiving a reverse premium from or to a non-compliant overseas landlord may constitute proceeds of crime under the Proceeds of Crime Act 2002. Failure to check whether an overseas seller or landlord has registered with Companies House could inadvertently jeopardise a buyer or tenant for money laundering purposes. Time will tell whether the Courts consider that a crime has been committed or a mere regulatory breach has taken place.
For more detail please see:
Register of Overseas Entities – GOV.UK (www.gov.uk)
Updated guidance from UK Gov_register-an-overseas-entity
HM Land Registry practice-guide-78-overseas-companies-and-limited-liability-partnerships
https://www.transparency.org.uk/uk-register-overseas-entities-through-the-keyhole
Additional Information
If you have any questions or think you may need to register your overseas entity, please get in touch with Ben Habershon at: hello@dixcartuk.com.
