The United Kingdom Economic Crime Act 

June, 2022 - Fanny Evans, Morgan & Morgan

The United Kingdom (UK) Economic Crime (Transparency and Enforcement) Act (the Act”) came into force on 15th March, 2022.


A new Register of Overseas Entities will be created and held by Companies House. This new Act forms part of the UK government’s strategy to combat economic crime, while making sure that legitimate businesses continue to see the UK as a great place to invest.


What does this mean?The new register will require overseas entities that purchased any UK land (which for the avoidance of doubt includes all residential, commercial, or agricultural property) on or after 1 January 1999 to declare its beneficial owners or managing officers. Overseas entities will not be able to buy, sell, transfer or lease land, or create a charge against the land in the UK unless they’ve registered with Companies House.


What is an overseas entity?An overseas entity is any legal vehicle that is governed by the law of a country or territory outside of the UK (e.g. British Virgin Islands, Bahamas, Belize, Panama, Uruguay, United States of America, Japan, Cayman Islands, Guernsey, Jersey, etc). This includes IBCs, Private Foundations, LLPs, and other non-UK partnerships with a legal personality. Do trusts need to be registered?The Act does not include non-UK trusts as they would not have separate legal personality. However, it is important to remember that any non-UK resident trusts that acquire UK land / property after 6th October 2020 will have to register with the Trust Registration Service – this is regardless of whether they are liable or not to pay UK taxes. The deadline for this registration is 1st September 2022. Furthermore, if the trustee is a registrable beneficial owner then information about the trust would need to be provided.


What do you need to do?You will need to provide basic details about the overseas entity and deliver one of the following three statements about its registrable beneficial owners and the required information for that statement:


1. That the entity has identifiable beneficial owners and can provide information about those owners; or2. That the entity has no reasonable cause to believe that there are registrable beneficial owners and will provide information about the managing officer of the entity. This only applies if you do not believe that there are registrable beneficial owners. If they meet the requirements of being a registrable beneficial owner, then their details must be provided; or3. That the entity either has a beneficial owner that it cannot identify or is unable to provide the required information about a beneficial owner and will provide information about the managing office of the entity or as much information as has been obtained about the beneficial owners.


What information will you need to provide?To see the information you need to provide please CLICK HERE.


What will happen to the information?It will be published on the Register of Overseas Entities and you will receive an Overseas Entity Identification Document (ID). You will need this ID to deal with any registered property in the UK.


Annual renewal is mandatory?To maintain a valid Overseas Entity ID you will need to comply with updating obligations, which include reconfirming the required information and statements to Companies House at least every 12 months.


When is the deadline?There is a short transition period of 6 months from the commencement date under the Act, 15th March, 2022.


We have not been informed of the commencement date, but we expect it soon, and almost certainly during 2022.


This 6-month period will not begin until the new register has been launched (and we don't have a date for that yet). Overseas entities acquiring land after the register has been launched will need to register with Companies House immediately.


What if you do not comply?Criminal sanctions, with fines ranging up to US$3,000 per day for failing to update the register, to unlimited fines, and imprisonment of up to 5 years for making false statements.


Restrictions to sell or mortgage the land or grant a lease will apply. Also, restrictions to buying new property or becoming the tenant of a property will apply.


How can we help?We work together with a prestigious UK law firm. They have expertise and special knowledge acting for international clients buying, selling, and financing UK land.


If the company decides that no longer wants to hold UK land, we can instruct them to act on behalf of the company the sale of the land.


If you do want to hold the land, then we can instruct them to obtain an Overseas Entity ID for you and to make the filings on your behalf.


We can also review your structure in conjunction with their team and your tax advisors to explore the holding structures for your UK land.


For more information, please contact [email protected] or:


Ms. Fanny Evans, Partner, Morgan & Morgan, [email protected]


DisclaimerThe information contained herein should not be interpreted, accepted, construed, or used and is not provided as legal advice and should not be treated as a substitute for legal consultations with a professional. It is merely a summary of the Economic Crime Act recently issued in the United Kingdom. Please note that the legislation referred to herein may be modified.


 



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