30 September 2022
The UK government has long sought to crack down on money laundering and has seen the ownership of UK land and property as a key area that is open to potential abuse by money launderers. Due to the ongoing conflict in Ukraine and the resulting increase in the number of internationally sanctioned individuals and organisations, identifying illicit money and addressing potential money laundering activity has become a much more urgent priority for the Government.
A new obligation
The route chosen to tackle such activity involving UK property is the Register of Overseas Entities. It went live on 1 August 2022 and aims to gather information on the ultimate beneficial owners of UK property held through overseas entities.
The register requires overseas entities that own property in the UK to declare their beneficial owners and/or managing officers, or otherwise they and their managing officers may suffer severe financial penalties and other sanctions.
Overseas entities that fall within the scope of the registration requirement have until 31 January 2023 to register and provide the required details to Companies House.
In addition, new restrictions on the ability to register property, which commenced on 5 September 2022, mean that overseas entities engaging in relevant land transactions thereafter are required to comply with the overseas entity registration requirement before any such transactions can be registered with the relevant land registry.
It will also be necessary to update the Register of Overseas Entities on a regular basis, within 14 days of the anniversary of initial registration or earlier, to provide details of any updates or confirm that there are no reportable changes.
The managing officers of overseas entities that do not comply can face criminal sanctions, including fines of up to £2,500 per day for failing to comply with the registration requirement or update the register, unlimited fines for making false statements, and/or prison sentences of up to five years. Civil sanctions also apply to unregistered in scope entities, with financial penalties and restrictions when trying to sell or lease UK property.
Who does this apply to?
The new obligation applies to overseas entities that own UK property bought on or after:
- 1 January 1999 in England and Wales;
- 8 December 2014 in Scotland; and/or
- 1 August 2022 in Northern Ireland.
Entities that no longer hold relevant UK property but meet the above requirements and disposed of such property after 28 February 2022 are also required to register.
The new measures require overseas entities to provide information on their beneficial owners. For these purposes:
- ‘overseas entity’ includes companies, partnerships with legal personality and any other similar entity that is governed by the law of a country or territory outside the UK, but excludes trusts on the basis that details for such entities are required to be provided through the existing trust registration service; and
- a ‘beneficial owner’ is an individual who holds, directly or indirectly, 25 per cent or more of the shares or voting rights of the entity, has the power to appoint or remove directors of the entity, or is able to exercise significant influence or control over the entity.
What you need to do
On initial registration, in scope entities are required to:
- provide details such as their name, country of registration, legal form and addresses;
- identify their beneficial owners by name, provide information such as their date of birth, nationality, nature of interest in the overseas entity and address, and confirm whether they are on the UK sanctions list;
- provide additional details for beneficial owners that are trusts, including the name of the trust, date it was created and details of the trustees, beneficiaries and settlors; and
- engage a UK based agent to complete verification checks on the information to be provided prior to submission.
All such information is then required to be kept up to date on an annual basis.
All overseas entities that may be in scope of the new requirement should review their position and take action to comply if appropriate. Entities planning to undertake a UK property transaction that brings them into the regime should aim to register in advance to ensure they are not prevented from registering the land title.
Please note that as RSM does not offer a registration or verification service for the Register of Overseas Entities, entities that believe they are or may be in scope should contact their legal adviser for appropriate support.
For more information, please get in touch with Adam Jefferies or your usual RSM contact.