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Register of Overseas Entities

  • November 18, 2023
  • 4 min read
Register of Overseas Entities

by Doug Shanks

I was pleased to be described by one reader as leftwing. Well to be precise, I was delighted to hear I had a reader. I would prefer to be seen as apolitical but anti-establishment whoever is making a mess of running our lives for us. The Register of Overseas Entities (ROE) strikes me as a relatively sensible innovation. I can’t remember many others in the last decade of Tory misrule. 

The creation of the ROE and the requirement for beneficial owners of UK properties to be reported to Companies House has significant implications for taxpayers. The main goal of this measure, introduced as part of the Economic Crime (Transparency and Enforcement) Act 2022, is to improve transparency and tackle tax evasion and money laundering involving UK properties.

Do I think sophisticated intentional money laundering will be stymied by this latest act of state control? I’ll come back to that one. What the ROW will do is codify and document taxable property assets like some latter-day Doomsday Book. HMRC introduced measures indexing residential lettings about 15 years ago and the ROE seems a natural extension. The lettings initiative targeted estate agents to increase declared rent and increased disclosure of residential sales. 

I doubt the register will help or hinder professional money-launderers much. The larger property transactions with money coming in offshore are too visible for much to get away. The yardstick is that money-laundering is 2% to 5% depending on how you look at it and what the real tax impact is. What the ROE will do, is what the government does so well, and target the essentially honest middle-income earners trying to make ends meet and accumulate some capital in a world dedicated to making that virtually impossible, for all but a few. In that, unusually, I suspect the ROE will generate a good return.

For taxpayers who own or are associated with overseas entities holding UK property, there are several important considerations. First and foremost, they must ensure that their overseas entities are compliant with the new requirement to register with Companies House and declare their beneficial owners or managing officers. Companies were expected to register by 31 January 2023. Failure to do so may result in monetary penalties or other sanctions.

The introduction of the ROE has given HMRC access to a wealth of data, helping them identify non-compliant overseas entities and scrutinise individuals or companies with beneficial interests in UK property or land. As a result, taxpayers who may have undeclared or incorrect UK tax liabilities related to their beneficial holdings, could come under HMRC’s investigation.

To encourage voluntary compliance, HMRC has set up a new disclosure facility. Taxpayers who suspect they may have undisclosed tax liabilities are encouraged to use this facility to get in contact with HMRC. Making unprompted voluntary disclosures may lead to lower penalties compared to if HMRC initiates the contact.

It’s important for taxpayers to be proactive and ensure they are compliant with the new regulations to avoid potential penalties or legal consequences. HMRC’s active use of the ROE data shows that they are committed to pursuing tax compliance, and non-compliant taxpayers may find themselves subject to increased scrutiny and enforcement.

In conclusion, the implementation of the ROE and the reporting requirements for beneficial owners have given HMRC more tools to identify tax evasion and promote transparency in property ownership. Taxpayers must ensure compliance and take advantage of the disclosure facility if they have any concerns about their tax liabilities related to UK property or land holdings.

My aforementioned reader will have heard my reworking of the famous Churchill’s democracy quotation (that it is the worst system of government ever devised except all the others), applying it to HM Revenue and Customs. (Have you learned to say “His Majesty’s” yet?). If you think our Revenue is tough, spend a couple of days with us dealing with the implications for US citizens who have overlooked their UK properties. All the ROE cases we’ve taken on have involved disclosure problems in the country of residence of the property-owning vehicle. Now, that isn’t going to be surprising. If you have outstanding disclosures where the asset is, it’s likely that there will be implications where ownership lies. It is likely that your solution will be driven by settling the UK position first because ours is probably the least worst legislature when things go wrong.

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Douglas Shanks

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