The Department for Business and Skills recently released a discussion paper on Enhancing transparency of beneficial ownership information of foreign companies undertaking certain economic activities in the UK. The focus is then turned on to the purchase of land or real property and public procurement. One option the Government is considering would be based on requiring foreign companies to provide information on their beneficial owners before they are able to buy land/property in England or Wales or enter into public procurement contracts in England. Additionally, consideration is being given to how these rules could also apply to the approximately 100,000 property titles that are currently registered to foreign companies. In a further move towards transparency it would seem the suggestion is that such information would be made publicly available, and as a first step, the Land Registry is publishing details of the legal owners and addresses of all properties owned in the UK by foreign companies.
The current proposal would require that, prior to being registered at the Land Registry as the owner of a property, the relevant foreign company would need to have provided information on their beneficial ownership to a new foreign companies beneficial ownership register (FCBOR) and then provide their identifier number from the FCBOR to the Land Registry. A failure to comply with these obligations would result in civil and criminal sanctions including the imposition of a daily fine and imposing restrictions on the ability of the company to take actions in respect of property (such as charge or sell property or purchase new property) It is possible that other penalties may be imported into the new registration requirement.
The Government has indicated that it is considering an exemption from the obligation to provide beneficial ownership information to a public register in the UK where the company in question is incorporated in a jurisdiction where adequate beneficial ownership information in relation to that company is available to the public.
There is an underlying message in the discussion paper that property is being used for hiding the proceeds of crime by corrupt individuals/organisations. Any action to stamp out such illegal activity is fully supported
Consideration should also be given to, and by the officers of, the many foreign companies who have acquired UK property for perfectly legitimate reasons.
We already know that HMRC are to receive a vast amount of data under the Common Reporting Standard (CRS) on offshore assets from next year and will be piecing together the position to establish where tax risks arise for further investigation. Having information on UK property owned by foreign companies, particularly where the beneficial owner is a UK resident, would be valuable additional information for HMRC if these measures come into force.
The rules on what needs to be provided if the company holding the property is owned by a trust will also be important. It remains to be seen if this will be in line with how the PSC register will operate.
The UK tax compliance position of foreign companies, including where there is also implications for UK resident individuals, should be considered by the officers of the company regardless of these potential new rules but clearly this emphasises the importance of doing so further.
The consultation is open until 1 April 2016.