The penalties come under proposals published by the Department of Business, Energy and Industrial Strategy today, designed to further clamp down on the use of the UK property market for money-laundering purposes.
The department has laid draft legislation before parliament which establishes a register on which foreign companies owning UK properties will be required to disclose their beneficial owners before they can sell or lease the property.
“For too long criminals have been able to use the property industry as a front for investing dodgy funds, hiding dirty money and evading the law,” said UK government minister for Scotland Lord Duncan.
“This stops now. Most people who invest in property across the UK do so fairly, and legitimately, but the UK government is clear that there is no longer any room for those that seek to exploit the system to hide.”
The new draft law introduces a number of penalties for non-compliance with the new requirements. As well as the five years and unlimited fines for failing to declare beneficial ownership of a property, individuals who fail to register overseas entities when instructed and those who knowingly try to deceive the register by providing false information will face up to two years’ imprisonment and unlimited fines.
It will also require companies to provide annual updates to Companies House to ensure that the information on the register is correct.
The new public register is the first of its kind in the world and the information it will provide is widely expected to reduce the potential for illegal activity while making it easier for law enforcement agencies to seize criminal funds.
As Kingston Smith tax partner Mark Fielden points out, “This move is in line with the general push for increased global transparency and means that UK property transactions will be pretty much impossible for non-compliant offshore entities.
“In recent years the tax advantages of holding UK property in offshore entities have largely ceased to exist. The anonymity of such structures was perhaps one of their few remaining benefits.”