Overseas entities require registration and disclosure of beneficial owners

From 6 April 2022, properties owned by overseas entities in England and Wales will be required to register details of beneficial owners of these entities. The entity will be required to register at Companies House in the UK and will require details of their beneficial owners’ details, modelled to information required regarding individuals who are PSC’s (person of significant control) i.e., those individuals who exert control over the entity. The register will be public domain and access available to all stakeholders. Land law in Scotland is different and will create and legislate its own laws. 

Presently there are around 93,877 properties (according to the land registry) owned in the UK through offshore entities. The government wishes to increase the transparency of the ownership of property in UK. The above process will hopefully deter illicit individuals who wish to conceal their identity to invest in the UK. This will ensure the UK remains a highly compliant jurisdiction and leading the way to combat tax fraud and money laundering. 

The word “entity” presently relates to Offshore Companies, partnerships (LLP’s) and foundations, all of which will need to comply. Offshore trusts are not required to register with Companies House since they have their own registration process though the ‘Trust Registration Service’. If a Trust/Company structure exists, the company officer details must be registered. If there are multiple layers of entities, the ultimate beneficial owner will need to be identified and registered.

The officers of the overseas entity must ensure the following steps are followed:

1. Identify the beneficial owner
2. Register the beneficial owner at Companies House
3. Complete annual returns to update the register 
4. Request removal from the register when required

The officers are required to issue information notices to persons they believe are beneficial owners and the recipient (beneficial owner must respond within one month),

Failure to register is a criminal offence and officers can face up to 2 years in jail (or 5 in extreme cases) for non-compliance. Financial fines of up to £500 per day may be liable too. It is also a criminal offence if the Beneficial owners do not provide information. 

The rules apply to land owned since 1 January 1999 in England and Wales. The offshore entities are required to register within 6 months of the rules coming into force. So, this is a retrospective legislation. Commencement date under the Act is, as of yet, unknown however we do expect this to be announced shortly.

HMRC, and other enforcement agencies will now take a keen interest in companies that now register and will cross reference details registered above with information they presently hold, such as the CONNECT HMRC system, CRS data bank system etc... Tax enquires may now arise from individuals who are registered as required above and are UK tax resident questioning their motive for an offshore entity. ATED (Annual Tax Enveloped Dwellings) tax charge may also be payable if the property is above £500,000.

What will Companies House do with the information?

The registrar will publish the pertaining information on the Register of Overseas Entities and issue an Overseas Entity ID to registered overseas entities (which the overseas entity will need to deal with any registered property in the UK). To maintain a valid Overseas Entity ID the entity will need to comply with updating its obligations, which include reconfirming the required information and statements to Companies House at least every 12 months. 

Companies House will not publish the day of the month on which an individual beneficial owner was born (just the month and year). They will also not publish residential addresses nor the contact details of individuals. In addition, information about trusts will not be publicly accessible although the information may be passed on to HM Revenue and Customs.

The above are important changes effective from April 2022, impacting beneficial owners and transparency within the UK. Please talk to your company manager or email us on info@fid.gi for further information.