INDUSTRY NEWS APRIL 2016
FOREIGN CORPORATE OWNERSHIP OF PROPERTY IN THE UK, GOVERNMENT TO LIFT THE VEIL?
As if anticipating the furore that marked the unravelling of the Panama papers in the last few weeks and in its quest for greater transparency in all spheres of fiscal regulation, the Treasury had in early March of this year invited responses to proposals requiring disclosure of “end beneficial owners of foreign companies buying United Kingdom (UK) real estate on a specific Register”. The proposal is also designed to target those foreign companies already owning property portfolio in the UK.
Government thinking is that a more intense light shone on the ultimate beneficial owners of these off –shore, property owning companies will enable Her Majesty Revenue and Customs not only to plug loop holes exploited by these tax-efficient off-shore vehicles but to clamp down on the serious offence of tax evasion.
Those who will be affected are individuals holding over 25% of the shares or voting rights in a company, can appoint a majority of the board or can otherwise exercise significant influence or control at board/managerial level. Professional advisers will be required to undertake verification process similar to Client due Diligence/ Know Your Client already carried out at the outset of most property transactions.
Enforcement action is also at the heart of the proposals with the assignment of a Unique Registered Number to every foreign company which provides the required information; it would become impossible to register any transfer of the property without this number. Penalties for providing false information may include administrative sanctions such as a daily fine and a suspension of their identification number to prevent the company from transferring or mortgaging the property.
It remains to be seen how investors who wish, for entirely legitimate reasons, to keep their investments confidential from the wider public (as opposed to HMRC) will view the proposals. The outcome of the EU referendum should also affect whether or not the proposals become legislation.
This section is only for your information and does not constitute legal advice.