CIOT warns of lack of clarity over aims of Register of Overseas Entities
The Chartered Institute of Taxation (CIOT) has warned MPs that a lack of clarity around the purpose of legislation creating a register of overseas entities owning UK property could leave many people disappointed that it will not achieve what they expect it to.
Legislation creating the register appears in the Economic Crime (Transparency & Enforcement) Bill which is being rushed through the House of Commons today, completing all its stages in a single day. The CIOT makes its comments in a briefing for MPs.
In the briefing, the CIOT stated: “Greater transparency of overseas ownership of UK property is welcome, but there is a lack of clarity over what the Government are trying to achieve with this measure. If it is, as suggested in some government statements, revealing the real identities of foreigners who own UK property, we do not believe that the Bill will achieve this.
“This is because the legislation as currently drafted does not require the disclosure of the ultimate beneficial owner of the property, but rather the disclosure of the beneficial owner of the overseas entity which in turn owns the property.
“This is a significant distinction. If an individual were to buy a UK property through a limited company of which he is the owner, then his personal details will be recorded on the register under these new rules, in his capacity as the owner of the company. However, if an offshore services company were to buy the property and hold it for the individual as a nominee, then the individual’s name will not appear on the Companies House register, as they are not the owner of the service company. Only the service company’s owners would – even then only if they own more than 25% of the service company.”
CIOT notes that the Government’s approach with the legislation mirrors what is currently the case for a UK nominee company. It continued: “HM Land Registry records would show that a property was owned by the UK nominee company, and you could see from Companies House records that the owners of the UK nominee company were a particular law or corporate services firm (provided they owned at least 25 per cent of the nominee company).
“However it would not be publicly available information who the beneficial owner of the land is. That information would generally be available to the authorities (and in limited cases investigative journalists etc.) via the Trust Register.”
CIOT additionally notes that if the trust in question is a non-UK trust, without other tax liabilities and which acquired the land on or before 6 October 2020, it would not have to register on the Trust Register in any case. In this scenario, it is possible a future change in ultimate beneficial ownership of the land could be hidden by the nominee company simply issuing a new, non-public declaration that it henceforth holds the property as nominee for a different person.
CIOT concluded: “In summary, if the Government’s aim is to achieve parity between overseas and UK companies in respect of revealing beneficial ownership the legislation does that. But if the aim is to reveal to the public which UK properties are owned by which wealthy foreigners then it does not achieve that.
“It would be helpful if the Government could explain which of these is their aim.
“If the Government’s aim is to make public the names of foreign individuals who are the ultimate beneficial owners of UK property then the legislation should be amended to achieve this.”
The CIOT briefing also sets out concerns around the definitions of ‘overseas entities’ and ‘beneficial owners’, how this legislation will be enforced, and whether the penalties proposed are a sufficient deterrent.