The Government put out a draft of the Registration of Overseas Entities Bill (the “draught Bill”) on July 23, 2018. The draft Bill explains how and what the Register of People with Significant Control over Overseas Companies (called “the Register”) does. Even though this draught Bill has been out for more than two years, this is still the most recent version of it.
We have listed 10 most important question that foreign owners of UK real estate should know before the register.
- 1. What is the Register used for?
- 2. Who has to sign up?
- 3. Who is considered to have a lot of power?
- 4. What will be said in the report?
- 5. Where can people get the information?
- 6. How often do I have to change the info?
- 7. What if I don’t do what you say?
- 8. When will this get here?
- 9. Is there anything that can be done to make this better?
- 10. Should I also think about anything else?
Read More About: Can Foreigners Buy Property in The UK?
1. What is the Register used for?
The official goal of the register is to stop money laundering (including tax evasion) and make it easier to find out who owns property in the UK. This makes sure that entities outside of the UK follow the same rules about transparency as entities in the UK.
Read More About: 9 Hidden Truths About Real Estate Investing in 2022
2. Who has to sign up?
Entities from outside the UK that own property in the UK will have to sign up.
In the draft of the Bill, the term “overseas entity” has a broad meaning. It refers to a legal entity that is “a non-UK registered body with legal personality that can own property on its own.”
Overseas entities must take reasonable steps to find their “registrable beneficial owners,” get the information about them that is listed in the draft Bill, and put this information on the Register.
A “beneficial owner” can be a person, a business, the government, or another public body. The draft Bill lists the relevant tests for figuring out who the “beneficial owners” are who are considered to have a lot of power.
Read More About: Top 12 House-Hunting Mistakes In Real Estate
3. Who is considered to have a lot of power?
The Register will use the same definition of “control” that is used by UK companies for the Register of Persons with Significant Control Regime.
As a result, people who have a lot of power are those who:
- hold more than 25% of the company’s shares directly or indirectly;
- hold directly or indirectly more than 25% of the entity’s voting rights;
- hold, directly or indirectly, the power to choose or remove a majority of the entity’s board of directors; or
- have the right to or actually have a lot of control or influence over the entity;
- have the right to exercise or actually exercise significant influence or control over a trust, partnership, or unincorporated association that meets any of the above tests but is not a legal person under the law of that jurisdiction.
Read More About: Should You Invest in Real Estate Now or Wait for the Market to Crash
4. What will be said in the report?
Overseas entities will have to give the Registrar of Companies information about themselves and their beneficial owners (Companies House).
Under the draught Bill, the following information about a single beneficial owner will need to be reported:
- Name, birth date, and country of birth
- Usual residential address
- An address for service
- The date when the person became a beneficial owner of the overseas entity who could be registered
- Confirmation of which of the requirements for beneficial ownership are met for the person.
For governments, public authorities, and other entities that are beneficial owners, other information is reported, but this is not covered here.
Read More About: A Renter’s Guide: Recommendations For Tenants
5. Where can people get the information?
The Register will be kept by Companies House, and most of the information on it will be available to the public, just like the PSC register for UK companies.
Once the Register is up and running, a search at HM Land Registry (for land registered in England and Wales) will show who the legal owner of registered land is. With information from HM Land Registry and Companies House, it will be possible to find out who the indirect beneficial owner of registered land is.
For land registered in Northern Ireland or Scotland, a search with the Land and Property Services (for Northern Ireland) or on the Registers of Scotland will give the same information, which can then be compared with the record for the overseas entity at Companies House.
Read More About: 15 Inquiries To Make During A Rental Inspection
6. How often do I have to change the info?
Every year, within 14 days of the end of the “update period,” the information will need to be changed. The “update period” is one year from the date the entity was registered.
Companies will have to give updated information if it has changed or confirm that it is still accurate if it hasn’t.
Read More About: The Best Castle Homes For Sale In UK
7. What if I don’t do what you say?
The draft Bill calls for a transition period of 18 months before its sanctions can be enforced against foreign entities that already own land in the UK and fall within the draught Bill’s scope.
After this time period, the main effects are twofold for foreign entities that do not already own land in the UK.
Read More About: How To Handle Rising Costs (Financing & Home)
Can’t take care of the property:
If a company doesn’t register or don’t keep up with the duty to update, it usually won’t be able to:
acquire legal title to land because the entity won’t be able to register as the owner or owner of land in the UK with the Land Registry;
If the company is already listed as the owner, it won’t be able to sell or lease the land or put a legal charge on it, because the buyer, tenant, or mortgagee wouldn’t be able to register the sale or lease with the Land Registry in any part of the UK.
Read More About: Buying a House With Cash Process UK
Fine and breaking the law:
It is also illegal to not keep the information on the Register up-to-date or to send or cause to be sent misleading, false, or deceptive information to Companies House. Fines and/or jail time can be used as punishments (up to a maximum of 12 months on summary conviction, or two years on conviction on indictment).
If you don’t update the information on the register, you could get a fine of up to £500 and another fine of up to £500 for each day until the register is updated.
Read More About: A Complete Guide & Tips For UK Home Buyers
8. When will this get here?
The government wants the Register to be up and running by 2021.
But a firm date for launch hasn’t been set yet because the Government is trying to find time during the pandemic to get the law through Parliament. No one knows if the Register will be up and running by 2021, but it would be smart to plan on the assumption that it will.
9. Is there anything that can be done to make this better?
Even though there might be ways to get around the reporting requirement based on the current law, it is probably not a good idea to try to do so.
The Register could be a good way to figure out if a company’s current structure is still good for what it was made for or if the property would be better off outside of the company.
As was already said, once the draft Bill goes into effect, companies will have 18 months to send the necessary information to the Register. Companies from outside the country should be able to sell property before the 18-month mark. This would get rid of the need for them to register.
But it’s important to remember that transferring a UK property out of a company as part of a restructuring could lead to UK tax charges like SDLT, corporation tax, and non-resident capital gains tax.
Also, all trusts that are not based in the UK and get UK land after October 6, 2020, will have to register with the Trusts Registration Service (TRS) by March 10, 2022. So, if a property is moved out of an overseas company and into an overseas trust, the TRS will still need to report the beneficial owner on the UK’s Trusts Register. But good information on the UK’s Trusts Register won’t be as easy for the public to find as information on the Register.
10. Should I also think about anything else?
Investors from outside the UK who want to buy residential property in the UK can protect themselves from the inheritance tax that may be due if the shareholder of the company that owns the property dies. They can do this by getting life insurance.
A policy like this would pay out a lump sum when the person dies. This would give the estate enough money to pay the inheritance tax.
It is very important that the policy be written in trust so that the money from the policy is not added to the estate.
 does.){kind=link}