The Chartered Institute of Taxation has warned MPs that a lack of clarity around the purpose of legislation creating a register of overseas entities owning UK property could leave many people disappointed that it will not achieve what they expect it to.
Legislation creating the register appears in the Economic Crime (Transparency and Enforcement) Bill was rushed through the House of Commons on 7 March, completing all its stages in a single day. Lords consideration was expected to begin on 9 March, with all remaining Lord stages scheduled for 14 March.
The Bill is intended to assist the National Crime Agency by reforming the current statutory provisions on unexplained wealth orders (UWOs) and requiring anonymous foreign owners of UK property to reveal their real identities via a new register of beneficial owners. The register will apply to property bought in the past (up to 20 years ago in England and Wales and since December 2014 in Scotland). Failing to declare who is the ‘beneficial owner’ can lead to restrictions on selling the property and potential criminal penalties.
However, in a briefing paper for MPs, the CIOT states: ‘Greater transparency of overseas ownership of UK property is welcome, but there is a lack of clarity over what the government is trying to achieve with this measure. If it is, as suggested in some government statements, revealing the real identities of foreigners who own UK property, we do not believe that the Bill will achieve this. This is because the legislation as currently drafted does not require the disclosure of the ultimate beneficial owner of the property, but rather the disclosure of the beneficial owner of the overseas entity which in turn owns the property.’
The CIOT explains: ‘This is a significant distinction. If an individual were to buy a UK property through a limited company of which he is the owner, then his personal details will be recorded on the register under these new rules, in his capacity as the owner of the company. However, if an offshore services company were to buy the property and hold it for the individual as a nominee, then the individual’s name will not appear on the Companies House register, as they are not the owner of the service company. Only the service company’s owners would – even then only if they own more than 25% of the service company.’
The government’s approach with the legislation mirrors what is currently the case for a UK nominee company, the CIOT says. The institute additionally notes that ‘if the trust in question is a non-UK trust, without other tax liabilities and which acquired the land on or before 6 October 2020, it would not have to register on the trust register in any case. In this scenario, it is possible a future change in ultimate beneficial ownership of the land could be hidden by the nominee company simply issuing a new, non-public declaration that it henceforth holds the property as nominee for a different person.’
The CIOT concludes: ‘If the government’s aim is to achieve parity between overseas and UK companies in respect of revealing beneficial ownership, the legislation does that. But if the aim is to reveal to the public which UK properties are owned by which wealthy foreigners, then it does not achieve that.’
The Chartered Institute of Taxation has warned MPs that a lack of clarity around the purpose of legislation creating a register of overseas entities owning UK property could leave many people disappointed that it will not achieve what they expect it to.
Legislation creating the register appears in the Economic Crime (Transparency and Enforcement) Bill was rushed through the House of Commons on 7 March, completing all its stages in a single day. Lords consideration was expected to begin on 9 March, with all remaining Lord stages scheduled for 14 March.
The Bill is intended to assist the National Crime Agency by reforming the current statutory provisions on unexplained wealth orders (UWOs) and requiring anonymous foreign owners of UK property to reveal their real identities via a new register of beneficial owners. The register will apply to property bought in the past (up to 20 years ago in England and Wales and since December 2014 in Scotland). Failing to declare who is the ‘beneficial owner’ can lead to restrictions on selling the property and potential criminal penalties.
However, in a briefing paper for MPs, the CIOT states: ‘Greater transparency of overseas ownership of UK property is welcome, but there is a lack of clarity over what the government is trying to achieve with this measure. If it is, as suggested in some government statements, revealing the real identities of foreigners who own UK property, we do not believe that the Bill will achieve this. This is because the legislation as currently drafted does not require the disclosure of the ultimate beneficial owner of the property, but rather the disclosure of the beneficial owner of the overseas entity which in turn owns the property.’
The CIOT explains: ‘This is a significant distinction. If an individual were to buy a UK property through a limited company of which he is the owner, then his personal details will be recorded on the register under these new rules, in his capacity as the owner of the company. However, if an offshore services company were to buy the property and hold it for the individual as a nominee, then the individual’s name will not appear on the Companies House register, as they are not the owner of the service company. Only the service company’s owners would – even then only if they own more than 25% of the service company.’
The government’s approach with the legislation mirrors what is currently the case for a UK nominee company, the CIOT says. The institute additionally notes that ‘if the trust in question is a non-UK trust, without other tax liabilities and which acquired the land on or before 6 October 2020, it would not have to register on the trust register in any case. In this scenario, it is possible a future change in ultimate beneficial ownership of the land could be hidden by the nominee company simply issuing a new, non-public declaration that it henceforth holds the property as nominee for a different person.’
The CIOT concludes: ‘If the government’s aim is to achieve parity between overseas and UK companies in respect of revealing beneficial ownership, the legislation does that. But if the aim is to reveal to the public which UK properties are owned by which wealthy foreigners, then it does not achieve that.’
