UK government finally seems to be acting on foreign ownership of UK property where the underlying owner remains a mystery. Over the years we have seen an array of companies registered all over the world, some in tax havens, acquiring UK property. Indeed a report by the Evening Standard last year suggested there was in excess of £100 billion worth of London property alone held by companies where reporting regulations are not as tight as those in the UK. So what are the government’s plans?
Money-laundering and tax evasion
The media, currently running a number of bash the rich campaigns, has been guilty of perhaps misreporting the government’s consultation document on property ownership by foreign investors. The fact is that just because the underlying owner is not made public does not mean that they have broken any money-laundering or tax laws. Indeed, and you will not read this in the general press, a number of foreign investors who own property in the UK regularly register their property interests with HMRC for tax purposes. It must also be noted that money-laundering amongst foreign buyers of UK property is on the whole not a problem.
There are of course exceptions to the rule which is why the UK government is now looking to create a formal register of ownership of UK property. At the moment we don’t know exactly which properties would be covered and how the registers will be managed. However, this is certainly a step in the right direction.
The consultation document confirms that all foreign companies investing in UK property would be allocated their own unique registered number. This number would be required when looking to sell or remortgage UK property with penalties for misinformation and any transactions could be blocked. It is difficult to say at this moment in time what kind of an impact these proposed regulations would have on the UK property market in the eyes of overseas investors. The fact is that the vast majority of overseas investors carry out very transparent transactions with no issues of note.
However, if you take a step back and look at the situation it is difficult to understand how so much prime property in the UK could be acquired by foreign owned companies without actually knowing the underlying owner.
It is believed that the government would look to exempt EU companies, in line with the one European market principle, so in theory these regulations would only apply to non-EU companies. Of course this may all change if the UK electorate were to decide to leave the European Union. It is also highly likely that property transactions below a certain value would be exempt as would rack rent leases of relatively small value.
The UK government had hinted that new regulations would be introduced to force foreign companies investing in UK property to confirm the underlying owners. It will be interesting to see how far the UK government goes because overseas investors have been very supportive of the UK real estate market. However, surely those with nothing to hide would have no problems with the proposals?