Changes To Rules For Overseas Owners of UK Properties

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Changes To Rules For Overseas Owners of UK
Properties
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Introduction
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.
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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.
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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 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.
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Who Needs to Register as an Overseas Entity?
This new register is aimed at businesses and the
individuals that own them and applies to
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• 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.

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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.
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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 months 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.
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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.
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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. Once organisations have
registered, they must comply with further
requirements to provide updated information
annually or verify that the records held remain
correct.
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Why Have So Few Organisations Complied With the
Register of Overseas Entities?
There are many factors at play, not least that
many high-value British properties are owned by
trusts with complex structures or could be owned
by investment funds and institutional investors,
with difficulties identifying beneficial owners
or where the beneficial owner is a corporate
entity itself. The scheme aims to stop illicit
financing being channelled through the UK
property market, estimated at around 100
billion. A second focus was to expose criminal
organisations using overseas entities to launder
money without disclosing the names of the
beneficial owners.
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Despite strict penalties for non-compliance, the
scheme has been slow to catch on, partly because
some organisations have been struck off or
dissolved. The UK government may not have access
to this information expected to be around 10
of the total. Another could be the inclusion of
retrospective purchases, where organisations are
instructed to register the beneficial owners
related to property investments dating back 24
years. Offshore companies controlled by trusts
may also be able to claim exemptions, regardless
of whether beneficial owners were required to
disclose their details in confidence to Companies
House.
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Information Source-
In the interim, any company owners or
shareholders living overseas or with shares in an
organisation located overseas that owns property
or has owned and sold property or land since 1999
should register if they have not yet done so or
seek legal advice to resolve any queries that are
preventing them from complying. For more
information about buying rental investment
properties in any area within West Sussex, please
get in touch with Tod Anstee at your convenience.
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