Living Overseas with Property Assets in the UK, or Intending to Buy? Here is what you need to know.
Five years have passed since the UK government set out its intention to create a public register of the beneficial ownership of “overseas entities’” UK assets – progress was slow to say the least with Brexit and then the pandemic slowing progress further. The recent invasion of the Ukraine by Russia saw the government expedite that intention and the new Economic Crime (Transparency and Enforcement) Act 2022 (“the ECA”) received royal assent on the 15 March 2022.
What is an “overseas entity”?
To understand the ECA we need to understand that it is an addition to a raft of historical measures seeking to impose financial or coercive measures on overseas legal entities to identify, control, change or stop them from behaving criminally. The ECA seeks to identify the ultimate foreign beneficial owner(s) on a public register even if that owner tries to hide behind a complex structure of shell companies.
Any corporate body including a partnership that is governed by the law of a country or a territory outside of the United Kingdom will be caught under the new rules. This will include those holding more than 25% of the shares or voting rights in the entity. If this test cannot be satisfied then the ECA looks to any beneficial foreign owner who nonetheless exercises significant control over the relevant entity (or has the right to do so), including those with the right to remove (or appoint) a majority of the board of directors.
What does the new ECA do and when will you need to comply by?
There are three main parts to the ECA:
Part 1 – establishes a new register of foreign owners of UK property, which will be held at Companies House and will be retrospective, in that it will (subject to a few limited exceptions) include all property purchases in England & Wales since 1999 (2014 for Scotland).
Foreigners looking to buy UK property will have 6 months, from the date of acquisition of freehold or leasehold land with over 7 years to run, to comply with the new rules.
In practice, it is unlikely the Land Registry will register an overseas entity as owner of a UK property until it has registered its beneficial ownership at Companies House first.
Those who already own UK property will have six months from the date of the ECA’s commencement to either apply for registration or dispose of their property. However, overseas entities trying to sell their UK property to get around the new rules, will not be allowed to without being registered first. Would-be sellers of property between 28 February 2022 and the date of full implementation of the new register are obliged to submit their details for registration.
Part 2 – makes wide ranging amendments to powers under the unexplained wealth order (or UWO) regime – a mechanism designed to confiscate the proceeds of crime, using civil rather than criminal powers pursuant to section 1 of the Criminal Finances Act 2017 (CFA 2017). This includes giving authorities the ability to apply for interim freezing orders.
Part 3 – strengthens provisions about sanctions. Fines of up to £2,500 per day can be levied against those who break the new rules, including criminal penalties for non-compliance of up to 5 years. Even where no monetary fine is imposed, the Office of Financial Sanctions will be empowered to publicly identify companies and individuals that it suspects to have breached financial sanction rules.
Further guidance and action
Bearing in mind the speed at which the UK government rushed the ECA through, further guidance from government and regulators regarding how and when entities should report is expected imminently.
In practical terms there is a lot to do and only time will tell whether Companies House and the Land Registry will cope with the deluge of applications.
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Dixcart Legal can assist with property related enquiries in the UK. If you have any questions about this article or require any further information, please contact Kuldip Matharoo or Peter Robertson: email@example.com.