Overseas entities that acquired UK property before 1 August 2022 must register with Companies House by 31 January 2023 or run the risk of possible criminal sanctions, accountancy and business advisory firm BDO has warned.

The Economic Crime (Transparency and Enforcement) Act 2022 introduced a new legal requirement for overseas entities owning UK property to register at Companies House and provide details of their beneficial owners. The rules apply to entities governed by law in a country outside the UK, so offshore companies, partnerships and foundations will need to comply. 

The data must be verified by an agent regulated under the Money Laundering Regulations, and criminal offences may be committed by those who fail to comply or who provide incorrect information. 

According to Land Registry data, 93,877 properties in England and Wales are currently owned through an overseas entity. 

According to BDO, Individuals who want to protect their privacy often opt to hold UK property through an overseas company, but keeping your name off Land Registry records comes at price: overseas companies must now pay Stamp Duty Land Tax (SDLT) at 17% when buying UK residential property.

Dawn Register, head of tax dispute resolution at BDO, said: “These new registration obligations aren’t designed to block offshore companies from owning UK property. Indeed, such structures can be set up for entirely legitimate commercial or personal protection reasons.

“The rationale behind these changes is to increase transparency of ownership. The government is conscious that the previous lack of transparency allowed those who wished to conceal their identity for other reasons – sometimes illicit ones – to invest in UK property. This is why part of the new registration process involves declaring the beneficial owners of the company to Companies House.

“Failure to register is a criminal offence, and the officers of the entity could face a fine and up to two years in jail – or five years in some extreme cases – if they do not comply. Similarly, failure of beneficial owners to supply information can also be a criminal offence under UK law so it’s important that affected parties take urgent action to comply.”

The register will be publicly available, and BDO warned that HMRC is likely to take a keen interest in the companies and individuals that appear. Overseas landlords will be taxable on UK rental income and HMRC will also want to check whether any Annual Tax on Enveloped Dwellings (ATED) is due; this is generally payable on residential property with a value of more than £500,000.