The proposed drawing up of a publicly available register of UK property ownership is likely to deliver another blow to the PCL market by deterring overseas entities from buying and selling, according to a top Mayfair law firm.
That’s sort of the idea, you might think, but Sara Maccallum, Senior Partner and Head of Tax at Boodle Hatfield has flagged up some “practical difficulties” with the “ambitious and far-reaching” plans, unveiled via a consultation published earlier this month…
“The idea has been around for a while and came to prominence last year during the Global Anti-Corruption summit. The rationale is to ensure the UK property market is open and transparent and to deter criminal activity, and that is clearly laudable. However, with Brexit negotiations shortly to start, any measures that may discourage investment in the UK needs to be viewed with caution.
“The plans propose that overseas entities would not be able to buy or sell property in the UK unless they have provided the requisite information. A note would be placed on the title at the Land Registry to that effect that the registered owner will be unable to sell, lease or mortgage the property where it is not complying with the new law.”
The consultation proposes that current owners would have a year from the introduction of the register to either disclose or sell the properties. Entities incorporated in other countries with equivalent publicly available registers will be exempt from registering in the UK. It is also proposed that criminal penalties may be introduced for non-compliance.
Maccallum: “There are a number of practical difficulties with the proposals which would need to be addressed, such as offering reassurances to banks who lend the funds for property transactions, ensuring there are adequate protections for beneficial owners to ensure their safety is not compromised, and to ensure the proposals could work across the whole UK.”
The register could be another blow for a PCL market still struggling with increased transaction costs, says Saskia Arthur, Head of Residential Property at the firm: “It is not clear how these proposed changes would affect the prime residential market, but given recent trends it is quite possible that it will again knock this market.
“It should also be noted that many prime residential property owners have extracted properties from corporate vehicles following the recent removal of the IHT benefits of holding property through offshore structures and increases in the annual tax on enveloped dwellings. Further new purchasers are increasingly less likely to use a corporate vehicle to hold residential property, so its impact may not be that severe, but only time will tell.”
The consultation closes on 15 May 2017. Read up on the proposals here