We have already seen last week, HMRC changing its rules on the Trusts Register by now requiring explicit trusts that do not currently have a liability to income, capital gains or inheritance taxes to register the trust with details of the settlor (who set up the the trust) and the beneficiaries. No doubt, this an effort to find out who owns what inside a trust and likely to pin down ‘oligarch’ funds.
On the 1st March, 2022, the Economic Crime Bill started its passage though the House of Commons and will no doubt be fast tracked through given sanctions by the UK on Russia.
The Economic Crime Bill basically covers the ownership of UK property by overseas entities or structures (companies and trusts) and requiring them to register with a new Register of Overseas Structures. It is basically designed to force transparency as to who the ultimate beneficial owner is of a property with a corporate structure.
There are three key elements to the Economic Crime Bill
Register of Overseas Entities
For UK entities holding property, there is already a requirement from 2016 that Companies House be informed of who ownes the property with the Persons with Signifcant Control Register (PSC Register).
Overseas entities are currently not required to register. This will change with the new Bill.
The Bill will require overseas entities to supply full details of ownership on the Register of Overseas Entities. The register will also be made public so that we can all find out who the beneficial owner is of property even if they are overseas.
Overseas entity owners of property owned from 01/01/1999 will be required to register within 6 months of acquiring the property. This includes Freehold property and leasehold property with a lease of 7 years or longer. Full ID verification will be required and penalties of between 2-5 years in jail will be imposed for failures to register.
Unexplained Wealth Orders
These started in January 2018 but there has been limited activity by HMRC given the requirement for force people and companies to explain ‘unexplained wealth’. For example, if you are a business person with a small company turning over £50,000 pa, how do you explain owning a Mclaren, living in a Manor House and your children being privately educated at a top school.
The Bill will make it easier for the authorities to puruse an Unexplained Wealth Order without the need to go to the High Court.
There will be bigger financial penalties for failing to comply with financial sanctions.
In addition, ignorance will no longer be a defence. You cannot use the defence that you did know about or have a reasonable case for defence in not knowing any financial sanctions. You will have a duty to check, regardless and fines will be even bigger for failure to comply with sanctions.
The key here is you are liable. Completing due dligence for any potential financial transaction or business dealing is a must. You have no defence if you breach any financial sanctions.