Register of Overseas Entities – non-compliance and penalties
As many readers will recall, the Economic Crime (Transparency and Enforcement) Act 2022 introduced the Register of Overseas Entities (the RoE).
The RoE required any overseas entity that holds property in England and Wales purchased since 1 January 1999 to register with Companies House, providing details of the property’s ultimate beneficial owner. The deadline for registration was 31 January 2023 with failure to comply being a criminal offence where the penalties include fines of up to £2,500 a day, the inability to deal with the property, and the possibility of imprisonment.
Against an unreasonably tight time frame, many companies acted with urgency to register before the deadline, rightly fearful of the implications of failing to do so.
However, it is understood that, almost four months after the 31 January 2023 deadline, approximately 5,000 companies have not complied with the rules. Yet a freedom of information disclosure application has revealed that HMRC has not issued any fines for failure to comply with the RoE, and it is not clear why.
It is thought that if the maximum daily penalty of £2,500 were applied to every company that had failed to comply, the fines in question would add up to around £10 million a day. In the time that has passed since the deadline, these fines would total around £1 billion.
We are told the authorities are building cases against the unregistered companies and working to prioritise action against the most egregious offenders.
This is in stark contrast to the rhetoric in circulation prior to the deadline, where we were informed that on 1 February 2023 the list of companies that had applied to be registered on the RoE would be run against the list held by HM Land Registry of properties held by offshore companies, and any non-compliant companies would be pursued immediately.
More will follow on other RoE developments in due course.
This article was first published in our Primed International newsletter which provides monthly legal insights from our international team. Be the first to receive the next edition and subscribe here.