As much as £1 billion in fines for foreign entities who failed to comply with the Register of Overseas Entities (ROE) rules are yet to be imposed, according to a new report.
The registration requirements are set out in the Economic Crime (Transparency and Enforcement) Act 2022, with any overseas entity – legal entities governed by the law of a country or territory outside the UK – that is the beneficial owner of land in the UK required to register that ownership on the ROE.
The deadline to register with Companies House passed on 31st January of this year, with the penalty for non-registration being as much as £2,500 per day.
Despite this, analysis from the BBC has revealed as many as 5,000 firms are still to register – including firms with links to oligarchs such as Roman Abramovich. The government has, however, indicated the actual figure may be lower given many companies no longer exist or have transferred properties away already.
However, the BBC estimates that “even if there were just 4,000 firms that are not complying with the law, the total value in fines would add up to £10m per day” assuming the maximum fine of £2,500 was issued. This, taken over the 100-day period since 31st January, would mean there is around £1 billion outstanding in fines.
While some foreign entities may not yet be aware of the law, and others may be struggling to verify and identify their own beneficial owners, there may be some that simply have no intention of complying, John Barnett of the Chartered Institute of Taxation is quoted as saying. These companies, he says, are taking the risk of fines and confiscation of the property.
The government reportedly says it is “building cases” against unregistered companies, and although fines are yet to be issued, action is being prioritised against the “most egregious offenders”.
In any case, ascertaining which overseas entities own what property is proving difficult. The owners of around 50,000 UK properties held by foreign companies are still unknown to the public. What’s more, Helena Wood, head of the UK Economic Crime Programme at the Royal United Services Institute think tank, said:
“Although the new register is to be welcomed as a deterrent for the future, its ability to retrofit an existing system based on 30 years of turning a blind eye was always going to be limited.”
To hear about how the ROE is affecting property transactions, listen to the podcast below – David Opie in conversation with Mike Ward, Executive Chairman of Armalytix.
