UK Crackdown on Offshore Companies Holding Property: Fines and bans ahead for Non-Compliant Owners
The UK government has recently introduced a new register of overseas owners of UK properties. This move was aimed at increasing transparency and cracking down on offshore companies that are using, as Martin Callanan, a business minister, stated “obscure trusts to hide assets for tax purposes”.
As per the government, out of the total 32,440 registered overseas organizations, around 40%, or almost 13,000 have failed to declare their beneficial owners. The government is now taking measures to tackle this issue, including investigatory powers for Companies House and the Insolvency Service, and investing up to £20 million to tackle money laundering through companies that own UK property.
Foreign companies are required to declare their beneficial owners on the register under measures in the Economic Crime (Transparency and Enforcement) Bill, which was enacted in March 2022. Companies that don’t comply with these measures could face severe financial penalties or even prosecution, even if they have disposed of their interests after February 28, 2022.
The register came into effect on August 1, 2022 and required all overseas entities who had purchased UK property or land in or after a certain date to register themselves. Companies House is now assessing and preparing cases for enforcement action against those who have failed to register on time, and there will be further investigatory powers for Companies House and the Insolvency Service.
On the 31st of January 2023, the deadline for companies to register passed. There was a last-minute rush, and Companies House posted a warning that they were receiving a high volume of applications and that processing times may be longer than usual.
According to The Guardian, of the companies that have declared a person as a beneficial owner, more than a third are British nationals. Other nationalities represented among the declared beneficial owners include Cypriot, South African, US, Saudi Arabian, and Chinese nationals. A significant number of the companies, around one in ten, do not list an owner, and about a third of the beneficial owners are named as companies rather than individuals, with at least 2,883 of these appearing as trust-based offshore.
As a result of these measures, unregistered overseas companies are now automatically rejected from registering ownership of any new land, and any UK buyers will be unable to transfer their title to the deed of any property bought from non-compliant organizations.
It is important to highlight that holding properties through offshore companies is legal, and some individuals may have legitimate privacy or security concerns or business reasons for using them. However, the government is now taking strong measures to ensure that such companies are transparent about their owners.
In conclusion, the introduction of the register of overseas owners of UK properties is a positive step towards increasing transparency and cracking down on illegal activities. It might have positive and negative impacts on the economy and real estate market in the short term, but the overall goal of creating a fairer and more stable market is likely to be achieved in the long run.