On 5 April 2017, the government launched a call for evidence on a register showing the beneficial ownership of property controlled by overseas companies and other legal entities.
This isn’t the first time that these proposals have hit the news. Last year, in March 2016, the government consulted on their proposals for such a register; the results of which were published last week.
The reasoning behind the government’s efforts is clear: improving transparency in ownership fosters confidence and trust and plays a key role in deterring cross-border and domestic crime and in particular money laundering for the funding of terrorism. Since 2004 enforcement efforts have stepped up. It is reported that £180m of UK property has been subject to criminal investigation as suspected proceeds of corruption, with 75% of this funded through offshore corporates. HMRC, in turn, have recovered over £2.7 billion from tackling tax avoidance schemes through the courts. The benefits of a register operate at an individual level too. Tenants would be able to look through an overseas landlord to obtain information on those with ultimate control and neighbours could trace the owners of buildings in their community.
Where are we now?
In June 2016, the government introduced a central, publically accessible register of beneficial ownership – the people with significant control (PSC) register, under which all companies incorporated in the UK must give information about people with significant control (those with a 25% share or voting rights or other form of control) of the entity. Before that, at the International Anti-Corruption summit in London in May 2016, the government committed to go further and introduce this new register.
What do the proposals involve?
The proposals call for a register of the beneficial owners of overseas companies owning UK property or engaging in UK government procurement. This will:
• Not be limited to companies limited by shares but will instead be applicable to all legal entities;
• Only apply to leases of over 21 years;
• Require registration of beneficial ownership at Companies House (adopting the existing definition of beneficial ownership that underpins the PSC) where UK property is bought or sold (including the grant of long leases);
• For property already owned by an overseas entity, require that entity to supply the beneficial ownership information over a transitional period, after which they will be prevented from selling, granting a long lease or granting a charge over the property unless the new register requirements have been complied with (as backed up by a note on the registered title).
• Require overseas entities that wish to take part in new central government procurement contracts valued over £10 million to supply beneficial ownership information before the contract is finalised.
The proposals represent a bold step for the government as the new register will be the first of its kind in the world. Margot James, Parliamentary Under Secretary of State for Business, Energy and Industrial Strategy, acknowledges that the government needs to proceed with care so as to ensure that the UK remains an attractive place for foreign investment.
The call for evidence on the new register closes on 15 May 2017; rest assured, as the detail is pored over, it won’t be the last we hear on it.