89: Public register of beneficial owners of UK residential property
Proposals have been afoot in the UK since 2016 to create a publicly available register of beneficial owners of UK residential property (the Register), based on the PSC register, (which details persons with significant control over UK private companies, limited liability partnerships and Scottish partnerships).
The policy context is the concern that UK land and property is being used to launder the proceeds of crime. The second stated aim is to increase transparency about who really owns land in the UK.
The draft Registration of Overseas Entities Bill (the Bill) was published in July 2018 and, if the timetable remains on track, would receive Royal Assent in the middle of next year, and the Register would go live in 2021.
In a nutshell, the Register will be held by Companies House and will require overseas entities who own or wish to purchase land in the UK to enter information about their beneficial owners. They will have to update that information annually. If they do not do so, the practical consequences are very serious in that the overseas entity will not be able to sell or lease land, or create a charge over it. For overseas entities that already own UK property, the Bill envisages an 18 month transition period to give time to declare beneficial ownership or to sell the land.
In May this year the joint parliamentary committee set up to review the draft legislation published its report which included 71 conclusions and recommendations on the draft legislation.
These revolved around certain issues like the exemptions from the requirement to register, and also the proposal that the information on the Register should be updated before a transaction takes place, and not just annually. But of particular interest to blog subscribers were the comments about trusts.
The view in the report was that trusts could be used to circumvent the requirements since the Bill in its current form does not require trusts to register. This sparked concerns about the administrative burden which might be placed on trustees of non-UK trusts and privacy issues.
The Government’s response to the joint committee report, published in July 2019, has allayed some of those fears. Any overseas entity holding land on behalf of a trust will be required to register and the names of the trustees or any other person exerting significant influence and control over the entity would be expected to appear in the Register. However the trust itself will not have to register.
UK and non-UK trusts with a UK tax presence are of course required to maintain a register of beneficial owners and register with HMRC using the existing UK Trusts Register (TRS). A non-UK trust which directly holds a UK property on which it is liable to UK income tax, capital gains tax or inheritance tax will need to register. For many trusts which already own UK property direct, say a residential property occupied rent-free by a beneficiary, registration might only be necessary on an eventual sale although a trust IHT charge might trigger the requirements earlier. However a new direct acquisition of a London property by a trust would require registration with the TRS as stamp duty land tax (which would be payable on all but the lowest value purchases) is one of the relevant taxes.
The Government has also resisted calls from the committee that the TRS be publicly available, stating that it is:
‘Keen to strike the correct balance between allowing legitimate access to the data held by the TRS and ensuring that it does not infringe on the privacy rights of trust beneficial owners.’
Whilst the structure of the new Register is becoming clearer, challenges still remain in making the Register fit with other measures like the PSC Register, the TRS and 5AMLD. The Government has however said that trusts should not be required to register twice (once with Companies House and once with the TRS), so at least that is something!