A register of overseas entities, managed by Companies House comes into force on 1 August 2022.
The new Economic Crime (Transparency and Enforcement) Bill received royal assent on 15 March 2022 and became an Act.
Under the Act, a provision as made for new Register of Overseas Entities to be created and held by Companies House. This new Act forms part of the government’s strategy to combat economic crime, while making sure that legitimate businesses continue to see the UK as a great place to invest.
What is the government doing and why?
The government is introducing the register to crack down on foreign criminals using UK property to launder money.
The new register will require anonymous foreign owners of UK property to reveal their real identities to ensure criminals cannot hide behind secretive chains of shell companies, setting a global standard for transparency.
This measure forms part of the government’s strategy to combat economic crime, while ensuring legitimate businesses continue to see the UK as a great place to invest and it is expected the register will have an immediate dissuasive effect on those who were intending to buy UK property with illicit funds.
How is the government going to do it?
The ‘Register of Overseas Entities’ will:
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provide more information for law enforcement to help them to track down those using UK property as a money laundering vehicle
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require anonymous foreign owners of UK property to reveal their real identity to ensure criminals can’t hide behind secretive chains of shell companies
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level the playing field with property owned by UK companies, who already need to disclose their beneficial owners to Companies House
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impose sanctions for non-compliance, including restrictions on registering or disposing the title of the land
The measures will apply to foreign owners of UK property. They will apply to:
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any company or similar legal entity that is governed by the law of a country or territory outside the UK (overseas entity)
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individuals who have significant influence or control over the entity, e.g. they hold 25% or more of the shares or voting rights (beneficial owners)
What will happen if they don’t comply?
If a foreign company does not comply with the new obligations, its managing officers can face criminal sanctions, including fines of up to £500 per day or a prison sentence of up to 5 years. Also, there will be the introduction of civil sanctions in the form of financial penalties and an overseas entity will face restrictions when trying to sell or lease their land.
If they are already registered, they will face restrictions over dealing with their land.
What will an overseas entity have to do who owns or wishes to own land in the UK?
An overseas entity will be required to identify its beneficial owner(s) and to register them with Companies House. Information supplied to the register will be required to be verified.
Once registered, an overseas entity ID number will be provided and the entity will be required to update its information annually, until such time as it successfully applies to be removed from the live Register of Overseas Entities.
To register title to land, an overseas entity will have to demonstrate it is registered and must comply with the duty to update information.
Who provides verification?
It is expected that entities working within the accountancy sector, including bookkeepers will provide such verification services, if they so wish, however those that decide to provide this service will need to apply to CH and be approved.
Companies House are to provide further guidance on the verification registration process and other guidance as soon as possible and will be published on their blog, see below.
