(Lexology) -- A publicly accessible register of beneficial owners of UK real estate will be available from 2021. Non-UK companies and other non-UK legal entities that fail to comply will not be able to transfer legal title to UK real estate held by them, or obtain unrestricted title to UK real estate they purchase; criminal sanctions could also be imposed for failure to comply. Non-UK trusts may be exempt from the requirements, but the extent of any exemption will not be clear until draft legislation is published later this year.
Which non-UK entities will be caught?
The requirements will apply to all non-UK companies and other non-UK legal entities (including trusts and foundations) that own, or wish to buy, UK real estate. There is no intention to limit this to residential property.
However, the government has indicated an intention to introduce certain exemptions. Most importantly, an exemption for trusts may be introduced where the trust has already registered beneficial ownership with HMRC under the recently introduced Trust Registration Service. Beneficial ownership information provided to HMRC under the Trust Registration Service is currently only available to law enforcement agencies and at present the government seems keen to preserve a degree of privacy for trusts established for personal and family reasons (for further details see our guide summarising when non-UK trusts are required to register with HMRC under the Trust Registration Service).
The government’s summary of responses to the consultation states that publishing the details of the beneficial owners of trusts “would not be proportionate and effective especially as disclosure would undermine family confidentiality”. It is helpful that the government has formally recognised this concern.
Who is a beneficial owner?
Where UK real estate is owned by a non-UK company, any individual who:
· holds – directly or indirectly - more than 25% of the shares or voting rights of a company
· can appoint or remove directors holding a majority of board voting rights or
· can otherwise exercise significant influence or control over a company
· will be a beneficial owner for these purposes and their details will have to be recorded on the new beneficial owner register.
· If a trust meets one of the control conditions (such that it would be a beneficial owner if it was an individual):
· the trustees of the trust; and
· any individual who has the right to exercise, or actually exercises “significant influence or control” over the trust
· may have to be recorded on the beneficial owner register of the company, but this will depend on the terms of any exemption for trusts.
What information on beneficial owners will appear on the register?
For individuals identified as beneficial owners it is likely that the following information will have to appear on the register:
· their name, date of birth and usual residential address
· the country in which the individual is usually resident
· their nationality
· an address for service
· the date on which the individual became a registrable individual and
· the nature of their control over the non-UK entity.
If a non-UK entity is not able to give information about its beneficial owners it will be required to provide information about its managing officers.
The information will be recorded at Companies House.
When will non-UK entities have to register beneficial ownership?
Non-UK entities that already own UK real estate will be given a set period to register their beneficial ownership information. The government had originally suggested they would have a year to register but are now inclined to extend this timeframe.
Sanctions for failure to comply
Failure to comply with the new rules could result in criminal sanctions. However, this is the last resort.
Where a non-UK entity that has failed to provide beneficial owner information buys UK real estate, the beneficial interest in the property will pass to the non-UK entity but not the legal title. The government has back-tracked from its initial proposal, that the transfer document would have been void.
If non-UK entities that already own UK real estate fail to comply it is likely that at a minimum a restriction will be placed on the registered title to prevent a future transaction affecting the real estate.
Individuals will be able to apply for their information to be suppressed in certain circumstances - for example, were publicly linking the property or entity to the individual will lead to an elevated public safety risk.