Foreign companies which hold UK property will have to register details of their beneficial owners on a public register under plans announced by David Cameron yesterday at the Anti-Corruption Summit in London. This will not only apply to foreign companies already holding property, but also to new buyers of property and to new bidders for UK government public contracts. 

A consultation is expected by the end of 2016 with new legislation being introduced in 2017. 

We shall wait and see but as the Government's own consultation paper acknowledges, there will be doubts as to the ability of HMRC to enforce any new law against foreign companies, as such companies are unlikely to have a place of business in the UK. One sanction being considered by the Government is the use of restrictions by the Land Registry which would effectively block the sale or mortgage of a property where the beneficial register details have not been provided.

Furthermore, according to Orbis, in April 2016 alone more than 12 million ownership changes (400,000 per day) took place at corporations worldwide. Faced with such a staggering number of beneficial ownership changes, HMRC may be looking for the proverbial needle in the haystack. The Government's consultation paper makes it clear that the register must be self-funding, out of recovered tax revenue. Therefore, in practice, how much resource can HMRC really commit to such an ambitious project?

As the Land Registry is due to be privatised, there may also be some tension between the enforcement demands of HMRC and Land Registry's desire to run an efficient, privately-owned business.

Another suggestion by the Government is that where a company is incorporated in a jurisdiction that already has a register of beneficial ownership, then that company will not be required to register again in the UK. In order for reciprocal arrangements with other jurisdictions to be effective, the Government will need to be comfortable that information held on the registers of jurisdictions such as Cayman is accurate. 

The definition of beneficial owner is likely to follow the traditional route of a person with shares or control (direct or indirect) over 25% or more of a company. Therefore, where confidentiality is important, for example in family trusts, we may see a move to distribute company shares between five family members or more, in order to preserve the confidentiality of the family's affairs.

As with much of the recent rhetoric on corruption, the UK Government is playing to the gallery with an announcement that has been well received by anti-corruption campaigners. However, the real merit of such an initiative can be measured only in the number and quality of prosecutions brought against offenders. 

Given the question marks above, for now, it is a case of "To Be Continued". 

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