UK property - overseas entities must register and declare their beneficial owners

Individuals who want to protect their privacy often opt to hold UK property through an overseas company but keeping your name off Land Registry records comes at price: companies must pay Stamp Duty Land Tax (SDLT) at 15% when buying residential property.

Of course, there is nothing wrong with owning UK property through an offshore company - such a structure can be set up for legitimate commercial or personal protection reasons and this is not being blocked by the rules. The Government’s aim is simply to increase transparency of ownership: it is aware that the previous lack of transparency allowed those who wished to conceal their identify for other reasons (sometimes illicit ones) to invest in UK property. This is why part of the registration process involves declaring the beneficial owners of the company to Companies House.

The rules apply to offshore companies, partnerships and foundations. However, offshore trusts owning UK land directly are not required to register with Companies House, as they must already be registered through the Trust Registration Service. Where an overseas structure includes both a trust and an overseas company or other entity, the officers of that entity must ensure that it is registered.

The requirement to register at Companies House applies where the entity holds freehold property and land, and leasehold granted for longer than seven years. Offshore entities must register before acquisition.

Where registrable land is held through a chain of companies, the general rule is that the overseas entity is required to look up through the structure and determine its ultimate beneficial owners.

The rules ensure that anyone can identify the ultimate beneficial owner of overseas entities which own UK land interests, and dissuade those planning to buy UK property with illicit funds.

To comply the officers of overseas entities must take reasonable steps to:

1. Identify any registerable beneficial owners of the entity
2. Obtain and provide the information to Companies House
3. Complete an annual return to update the register
4. Request removal from the register at the appropriate time

Overseas entities must issue ‘information notices’ to all persons that they know (or have cause to believe) are beneficial owners, and the recipient must respond within one month. Share ownership or voting rights of more than 25% of the overseas entity will put someone in the “beneficial owner” category, along with all directors. Even where the ultimate beneficial owner in an overseas structure is a trustee, details of the trust must be disclosed, and information in relation to any and all beneficiaries, the settlor, and any other individual or entity with control over the trust (for example, a protector) reported.

This information needs to be verified by a UK-based agent who is supervised under the Money Laundering Regulations 2017 (eg an accountant or lawyer) before it is submitted.

Failure to register is a criminal offence, and the officers of the entity could face a fine and up to two years in jail (or five years in some extreme cases) if they do not comply. Similarly, failure of beneficial owners to supply information can also be a criminal offence under UK law.

For UK-resident individuals connected to the overseas entity, the issues which could result in a UK tax liability include:

• Gains attributed to them as participators in a company.
• Tax on benefits such as the occupation of a property or other transfers of assets abroad.