Government issues call for evidence on beneficial ownership register of offshore entities owning UK property
The Government has published proposals to create a publicly available register of beneficial owners of companies and other legal entities which own UK properties.
The proposals are, says law firm Boodle Hatfield, ambitious and far-reaching and could deter overseas entities from buying and selling property in the UK.
Sara Maccallum, senior partner and head of tax at Boodle Hatfield said: “The idea has been around for a while and came to prominence last year during the Global Anti-Corruption summit. The rationale is to ensure the UK property market is open and transparent and to deter criminal activity, and that is clearly laudable. However, with Brexit negotiations shortly to start, any measures that may discourage investment in the UK needs to be viewed with caution.”
The proposals are made in a consultation launched on 5 April and recommend a register to be kept by Companies House operating on similar lines to the existing ‘people with significant control’ register for UK companies, and requiring similar disclosures.
Sara adds: “The plans propose that overseas entities would not be able to buy or sell property in the UK unless they have provided the requisite information. A note would be placed on the title at the Land Registry to that effect that the registered owner will be unable to sell, lease or mortgage the property where it is not complying with the new law.”
The consultation proposes that current owners would have a year from the introduction of the register to either disclose or sell the properties. Entities incorporated in other countries with equivalent publicly available registers will be exempt from registering in the UK. It is also proposed that criminal penalties may be introduced for non-compliance.
Sara concludes: “There are a number of practical difficulties with the proposals which would need to be addressed, such as offering reassurances to banks who lend the funds for property transactions, ensuring there are adequate protections for beneficial owners to ensure their safety is not compromised, and to ensure the proposals could work across the whole UK.”
The consultation follows a decline in the volumes of prime central London residential transactions, blamed in part on the increases on stamp duty land tax on high value properties and the increase on rates for second homes.
Saskia Arthur, head of residential property at Boodle Hatfield adds: “It is not clear how these proposed changes would affect the prime residential market, but given recent trends it is quite possible that it will again knock this market.
“It should also be noted that many prime residential property owners have extracted properties from corporate vehicles following the recent removal of the IHT benefits of holding property through offshore structures and increases in the annual tax on enveloped dwellings. Further new purchasers are increasingly less likely to use a corporate vehicle to hold residential property, so its impact may not be that severe, but only time will tell.”
The consultation closes on 15 May 2017 and can be found here.