The Economic Crime (Transparency and Enforcement) Act 2022 (“The Act”), received Royal Assent on 15 March 2022. The Act was fast-tracked through Parliament as a result of Russia’s invasion of Ukraine and has created a register of overseas entities (this applies equally across all jurisdictions of the UK).
Main Objectives of the New Register
The main objectives of the new register of overseas land owners are to:
- Prevent and combat the use of “illicit funds” to purchase property in the UK.
- Increase visibility of beneficial ownership information relating to overseas entities that own land in the UK and public trust in overseas entities engaged in land ownership in the UK.
UK Territorial Effect of the New Legislation
The Act has different provisions for different jurisdictions across the UK, however the main policy objectives shall remain homogenous across the UK. The Act itself will:
- Apply to any overseas entities that are registered as the proprietor of a “qualifying estate” in land.
- Introduce a new obligation requiring that “overseas entities” wishing to own property in the UK register the identity of their beneficial owners and that overseas entity at Companies House. They are obligated to keep the register updated and failure to update the register is an offence under the Act. Business Secretary Kwasi Kwarteng stated that the register would be the first of its kind in the world and “have an immediate dissuasive effect on oligarchs attempting to hide their ill-gotten gains.”
The Meaning of “Qualifying Estate” in Land
A qualifying estate in land is where the overseas entity is the registered proprietor of land under the Land Registration Act 2002 and became so registered pursuant to an application made on or after 1 January 1999. The below sets out the definition of “qualifying estate” in each UK jurisdiction:
- England & Wales: a freehold estate in land or a leasehold estate in land granted for a term of more than 7 years from the date the lease was granted.
- Northern Ireland: a freehold estate in land or a leasehold estate in land where the lease is granted for a term of more than 21 years from the date of the grant.
- Scotland: As a whole similar provisions apply to Scotland, however for leases it will only include those with a term in excess of 20 years.
Summary
The Act clearly demonstrates the UK Government’s desire to enhance control and transparency over overseas entities that own land in the UK. It intends to deter those who seek to hide and funnel proceeds of organised crime, terrorism and corruption within the abovementioned jurisdictions.
This article has been produced for general information purposes and further advice should be sought from a professional advisor. Please contact our Commercial Real Estate team at Cleaver Fulton Rankin for further advice or information.
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