On 1 August 2022, the Register of Overseas Entities took effect under the Economic Crime (Transparency and Enforcement) Act 2022. It aims to tackle money laundering, which is a particular risk affecting the property sector, and so has implications for property owners.
All overseas entities that are buying, selling, charging or letting freehold property or a leasehold estate granted for more than seven years (‘qualifying property’) must now register with Companies House for an overseas entity ID, which must be provided to the Land Registry whenever dealing with qualifying property; and inform Companies House of the identity of beneficial owners or managing officers.
The legislation applies retrospectively for England, Wales and Scotland. For England and Wales, it applies from 1 January 1999. For Scotland, it applies from 8 December 2014. This means that overseas entities that have dealt with qualifying property from these dates must register on or by 31 January 2023. The legislation is not retrospective for Northern Ireland.
Overseas entities that have disposed of qualifying property after 28 February 2022 must also provide details of those dispositions.
Overseas entities must be verified by a UK-regulated agent within three months prior to the date of registration, pay a £100 registration fee and file annual updates with Companies House following registration, confirming whether changes to the information held have occurred.
Estate/letting agents can act as agent for verification purposes, subject to obtaining an assurance code, and can complete the registration process for overseas entities. Otherwise, a separate statement confirming verification will be required within 14 days of the application.
The register will provide greater transparency to HMRC and other enforcement agencies. It would, therefore, be prudent to take independent tax/legal advice and consider making a voluntary disclosure to HMRC if advised to do so.
Failure to comply with the new legislation could lead to a fine of £2,500 for each day of non-compliance, a prison sentence of up to five years and/or restrictions on the ability to deal with qualifying property. It is, therefore, important to take prompt advice and action.
Natalia Aguilar is a senior associate at law firm Freeths