The government’s recent call for evidence on the introduction of a public register showing who owns and controls overseas legal entities that own UK property could be seen as another step towards implementation, but when the register will come into being and the extent of the disclosure required remains to be seen.
This consultation follows hot on the heels of draft legislation aimed at bringing offshore companies owning UK residential property within the scope of UK Inheritance Tax. Although the introduction of this legislation was dramatically put on hold at the last minute until after the General Election, it was expected to come into force in April this year, so while a number of offshore companies were collapsed pre-April, many place such a high value on the confidentiality offered by an offshore company, that they opted to retain their offshore company structure and accept the tax consequences.
A register of ownership showing who owns and has significant control over UK companies already exists and was introduced in June 2016. This is also known as the people with significant control (PSC) register. The government’s intention appears to be that the information provided on the new register should mirror that of the PSC register and the information on the overseas register will also be held at Companies House.
The proposals suggest that all overseas legal entities capable of holding UK property as well as those bidding on central government procurement contracts should fall within the remit of the overseas register. In order to buy, sell or create a long lease or legal charge over UK property, the entity will need to lodge certain information regarding the identity of its beneficial owners. Without a registration number, overseas entities will not be able to deal with UK property. Those companies already holding UK residential property will have a year to apply for a registration number and lodge information during a transitional period.
It is evident from the questions included in the call for evidence that the government is conscious of the need to strike a balance between encouraging transparency without putting off legitimate investors or risking the safety of those whose information should not be made publicly available.
Now that the public responses from the consultation are being reviewed, it will be clear from the pace at which these proposals continue as to whether the new register will be deemed capable of achieving these aims or indeed whether the government might consider that the goodwill of foreign investors and the buoyancy of the property market is too important to risk in the current political climate.