Changes to Rules for Overseas Owners of UK Properties

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The government announced new rules linked to UK properties owned by overseas businesses in August 2022. Businesses and owners had until 31st January 2023 to report to the Register of Overseas Entities.

However, various issues, from lack of awareness to non-compliance, mean that only 19,510 of 32,440 overseas organisations submitted their details to the register before the deadline. A further 5,000 are expected to be pending.

This guide explains what the register means, who it applies to, and what to do if you are obliged to declare your ownership and still need to do so.

The Purpose of the Register of Overseas Entities

The logic behind the register relates to attempts by the UK government to enforce transparency around foreign nationals with business assets and properties within Britain – it is part of the Economic Crime (Transparency and Enforcement) Act 2022.

One of the many problems has been the scope and breadth of the scheme, which incorporates beneficial owners and expatriates, potentially including British citizens who trade through an offshore limited company or similar structure, because of the tax efficiencies available.

The pre-existing Non-Resident Landlord system is separate and may have led to confusion where owners of UK Chichester rental properties believe that they are already compliant and registered as an Overseas Landlord and therefore are not subject to the new rules. This scheme applies to individual owners, rather than those trading through an overseas business.

Who Needs to Register as an Overseas Entity?

This new register is aimed at businesses and the individuals that own them and applies to:

• Any business registered overseas that has purchased property or land in Britain since 1st January 1999 (in England and Wales).

• Company owners who purchased property or land within that period and disposed of it before 28th February 2022.

• Properties or land owned freehold or leasehold for at least seven years.

• All legal entities, including companies, partnerships and other organisations registered outside the UK, including owners of businesses in Ireland.

Beneficial owners can be individuals, trustees, or other companies, but the regulation requires disclosure of anybody who holds 25% of shares, directly or indirectly.

Verification Checks for Overseas Entities Owning UK Property

Another complication is that companies or organisations registered overseas are required to work through a verification process. However, overseas entities that had owned British land or property and sold it before 28th February 2022 are exempt.

A verification check can only be completed by an agent registered in the UK, who can validate the identity of the owners and status of a business registered overseas – this is necessary before the organisation can submit details to the overseas register.

Agents include legal professionals and financial institutions, and the verification must be completed within three months of the registration date.

Those professionals with the accreditations to act as agents must also contact Companies House to request an agent assurance code before they can provide services. Agents without a code cannot file verification statements.

Once an organisation has appointed an agent, it must also give one month’s notice to beneficial owners before their details can be registered. The notice asks the owner (or shareholder) to respond within 30 days, confirming their details.

Impacts of the Register of Overseas Entities

Many organisations subject to these new rules will not take any further action since the primary objective is to identify concealed ownership structures, prevent money laundering, and avoid companies from disguising the true beneficial owners of UK property and land.

However, restrictions will be applied to all overseas entities from 31st January 2023. An overseas organisation is prohibited from transferring or leasing any UK property or land for seven years or more without registration.

The Land Registry will restrict the title deeds of all land or properties considered owned by an overseas entity that is not registered and will impose this limitation until the organisation complies. Those who do not register and fail to comply with the restrictions on the use of their property or land could face criminal charges or be further limited in any land transactions.

Non-compliance for registered organisations could result in an initial fine and a default penalty of up to £2,500 per day, as a maximum.

While these restrictions are intended to incentivise overseas entities to register, the fact that 40% still need to do so, weeks past the end of the transition period, demonstrates the level of confusion, misunderstanding or deliberate non-compliance present.

Information Source: – https://www.todanstee.com/latest-news/changes-to-rules-for-overseas-owners-of-uk-properties/