DEADLINE 31 JANUARY 2023
Background
The core provisions of the UK Economic Crime (Transparency and Enforcement) Act 2022 (the “ECA“) came into force on 1 August 2022, introducing a new Register of Overseas Entities (the “ROE“) administered by Companies House. The landscape for dealings with or by overseas entities holding UK real estate has irreversibly changed as a result.
Overseas entities looking to buy, sell, lease, charge or transfer property or land in any part of the UK must register with Companies House and disclose their registrable beneficial owners or managing officers.
Registration requirements and deadlines
With effect from 5 September 2022, overseas entities need to be registered on the ROE before they can acquire property or land in the UK. The ECA applies to all parts of the UK, subject to the three different legal regimes and land registries.
Where the overseas entity already owns property in the UK, and it acquired that property after 1 January 1999 in England and Wales (the dates in Scotland and Northern Ireland do not go back as far), it must submit the application to register in the ROE and obtain an overseas entity ID number by the deadline of 31 January 2023. The number will need to be shared with the Land Registry whenever the overseas entity buys, sells, transfers, leases or charges UK property or land in order to be registered.
There are also anti-avoidance rules that apply to overseas entities that would have been within scope if they had not sold the relevant land on or after 28 February 2022.
Verification
In order to register, the information an overseas entity provides about itself and its beneficial owners must be independently verified by a ‘relevant person’ (a subset of persons supervised under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017). A relevant person includes financial institutions, accountants, tax advisers, lawyers and trust/company service providers.
ROE verification includes verification of the nature of control and, therefore, requires the verifier to conduct a legal analysis of the ownership structure in order to determine the accuracy of the proposed disclosure. The ROE is complex and requires specialist company law experience. In all cases, it will be necessary to deal with overseas jurisdictions. A familiarity with international corporate forms and trust laws is invaluable.
Consequences of non-registration
Managing officers of overseas entities are personally responsible for ensuring compliance with the ECA and criminal sanctions may be imposed, including fines of up to £2,500 per day and prison sentences of up to five years.
From 1 February 2023, a restriction will be entered on the title register of land or property held by an overseas entity preventing it from transacting with its UK land or property unless until it is registered on the ROE.
Summary of Key points
- The ECA provides for a new register of overseas entities to disclose beneficial owners who own or acquire land.
- Since 5 September 2022, new purchasers of UK land are not able to apply to register their title without an overseas entity ID number.
- The ECA establishes offences for non-compliance, potentially punishable by fines which could easily aggregate to many hundreds of thousands of pounds and imprisonment.
- Any overseas entity owning property in the UK should take steps to comply with the ROE requirements by identifying beneficial owners and obtaining the required information; this information must be verified by a ‘relevant person’, enabling registration before the 31 January 2023 deadline.