Contractors’ Questions: Will a new UK register of overseas companies affect me?

Contractor’s Question: I’ve heard that the government is looking at building yet another searchable database which, like the existing companies register of ‘beneficial ownership,’ is going to store data on companies. Are us contractors going to have to populate this new database with details we’d probably rather keep to ourselves? What’s the likely impact?

Expert’s Answer: You’re asking about something that is actually remarkably similar to director disqualifications by the Insolvency Service, in that what sounds truly scary from afar shouldn’t actually affect too many UK limited company contractors up close, or in practice.

The database you mention partly stems from a change in public opinion about foreign ownership of UK properties, especially high-end residential assets in London. It also stems from what you clearly know about already -- action that the government took in 2016 to introduce a register of beneficial ownership of UK companies. The 2016 register was set up and went live to counter the growing scandal of “opaque ownership structures,” notorious for disappearing behind a veil of secrecy in certain offshore jurisdictions, like the Cayman Islands.

A briefing note published this month in the House of Commons, which follows a fresh BEIS review of the register, appears to show the government to be relatively content about how the 2016 register is faring, save some improvements it wants to make around accuracy, efficiency and potentially scope.

F1 driver Lewis Hamilton is probably less content. The briefing note in the Commons says: “Shareholders could be, and indeed often are, other companies, thus hiding the identity of the person in control.

“For example, the sole shareholder of Project Forty Four Limited is Inday Rose Ltd, a company registered in the British Virgin Islands (see the annual return in the company’s filing history). But thanks to the PSC register, we can know that the ultimate owner of Project Forty Four is racing driver Lewis Hamilton.”

Liking the idea of the register, the government last year consulted on what you’re asking about now -- proposals to require the disclosure of the identity of all foreign owners of UK properties (which may be via the owners’ overseas companies). Currently, the government is considering the responses.

The government’s language here is very similar to the wording it uses in and around the beneficial-ownership register for UK companies. “The UK benefits from foreign direct investment, including in property. However those who invest in the UK property market can use opaque company structures to obscure their identity,” it says.

But with this new register, the target is so-called ‘dirty’ money being laundered through the UK property market. The database should also help address issues faced by tenants and neighbours of foreign–owned properties in identifying with whom to lodge complaints or to take action against.

Although the majority of such properties are residential, a significant number are commercial and so there is a possible impact on UK contractors here, as some freelancers or consultants may be the tenants of these buildings. The most obvious risk if the database and its requirements are imposed is that foreign investors might pull out of the UK market, causing a fall in property values and possibly a reduction over time in maintenance spending, which could impact on the working environment. Equally, foreign company owners might seek to increase their properties' rents and service charges to cover the extra cost of complying with the new regulations.

But the consensus view from the consultation on the database was that the impact on the UK property market would be limited. So at this stage, the database looks like one compliance campaign which might end up being a bit of a paper tiger, potentially not that scary other than to the extremely non-compliant, and likely to not end up biting the professional, UK contracting community (for once).

The expert was Nick Hood, senior adviser to Opus Business Services Group.

Tuesday 13th Aug 2019
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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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