Whilst the notion of a register of beneficial interests in UK property has been discussed in governmental circles for some years, it appears that the recent wave of sanctions against Russia has greatly accelerated this new legislation. Today, the UK government will formally begin the process of seeking to pass new laws; requiring any owners of UK property to be identified personally, rather than allow those identities to be obscured by various offshore entities.
If passed, all ultimate beneficial owners of such properties will need to be reported to HMRC and presumably an annual update filed each year. Currently, a significant number of UK properties are held via nominee companies; an arrangement whereby the legal interest (crudely the name on the property title) is registered as one corporate entity, which itself is ultimately owned by an individual (who holds the beneficial interest). Whilst there are legitimate reasons for properties to be held in this fashion, it is apparent that the system is open to abuse, and that the UK government has concerns that sanctioned individuals may very well be holding UK real estate.
The legislation will also clearly have teeth with HMRC, retaining the ability to lodge a restriction against a property's title frustrating any sale, and even imposing prison time of up to five years for anyone who fails to comply. It is also interesting to see the ability of the UK's law enforcement agencies to obtain Unexplained Wealth Orders being expanded to cover such properties and indeed those held within trusts.
There remain valid concerns about confidentiality, and indeed the increased risk that foreign individuals could be subject to crime as a result (kidnapping, fraud etc.). However, I suspect the government will deal with this by restricting access to the register; as indeed they have done with the trust register - the Trust Registration Service (TRS). Here, such information can only be accessed by governmental and law enforcement bodies with a valid reason for doing so. Such steps would seem to strike the correct balance between a person's legitimate right to privacy, whilst ensuring transparency. Given the new law is proposed to apply retrospectively to property bought by overseas owners up to 20 years ago in England and Wales, there may well soon be some eye-opening declarations.
The government says that the register 'will require anonymous foreign owners of UK property to reveal their real identities to ensure criminals cannot hide behind secretive chains of shell companies, setting a new global standard for transparency.' Failure to declare beneficial ownership will result in entities facing restrictions over selling their property and a possible prison term of up to five years.