In April 2017, the Department for Business, Energy & Industrial Strategy (BEIS) launched a call for evidence setting out proposals for a new beneficial ownership register of overseas companies that own UK property. The consultation closed in May 2017 and we await a full government response.
In the meantime, a timetable for the introduction of the register has been outlined in parliament. The Government confirmed, in December 2017, that it would be going ahead with the proposals and committed to publishing a draft bill as a catalyst for the register’s introduction. The new register makes up part of the UK’s corruption strategy for 2017-2022.
The draft bill is expected by summer 2018 and the intention is to have an operational register by 2021. Overseas legal entities will then be required to provide information on the beneficial ownership of property that they own or purchase in the UK.
The new overseas register is required, the Government says, because more than £180 million worth of property in the UK has been investigated since 2004, with purchase proceeds coming from suspected corruption. Also it is estimated that around three quarters of properties currently being investigated engage in some form of offshore secrecy.
Following the tighter PSC rules, which were introduced in June 2017, the overseas register is another measure intended to reduce opportunities for money laundering and the purchase of UK property with ‘dirty money’.
Increasing transparency promotes trust and confidence and helps to deter money laundering. It also ensures that the UK remains an attractive place of foreign investment.
But the register could also, potentially, benefit tenants who would have the ability to ‘look through’ a landlord and obtain details on those with ultimate control of the property they inhabit.
So why the three year(!) wait until implementation? Well, in a recent parliamentary debate the complexities of the new register were laid down, in particular, the requirement to work with Companies House and the land registries of England, Wales and Scotland to ensure a smooth system is put in place.
A comparison with the PSC register was made – it took four years to implement that register from the date the necessary legislation was passed. However, the ‘world-leading’ framework that followed made the process worthwhile.
Affected entities will also need time to prepare for the new register. For example, overseas entities that purchased property in the UK many years ago will not have had these new requirements in mind at the time of purchase. In the majority of cases, property would have been purchased for a legitimate purpose with genuine, bona fide funds by those who were expecting privacy by ownership through a legal entity.
In the consultation last year, a one year transitional period was suggested to give those entities time to decide whether to disclose the information or dispose of the property.
It is unclear, following the most recent government update, whether the proposals relating to entities involved in government procurement will be adopted.
As it stands, before the Government’s official response to the consultation, the proposed register:
- will not be limited to companies limited by shares, but will apply to all legal entities;
- will only apply to leases of over 21 years; and
- will require the registration of beneficial ownership information at Companies House (following the same rules that underpin the PSC regime) where UK property is bought, or sold, including the granting of long leases.
The Government has acknowledged that the register should only contain useful information, be publicly and easily accessible, protect the information of those at risk and not create disproportionate burdens or put off legitimate investors. A balance must be struck between increasing transparency and ensuring a steady stream of foreign investment in the UK.
We will know more details following the Government’s response and the introduction of the draft bill to parliament this summer.