Free updates are available through the Property sector myFT Digest, which can be delivered directly to subscribers’ inboxes.
The United Kingdom has managed to collect only 3% of the fines issued to offshore companies that failed to comply with transparency legislation intended to expose illicit wealth within the property market. According to data released by Companies House to the Financial Times, 444 fines were issued to companies for non-compliance with the Register of Overseas Entities since January 2023, but only 14 fines have been collected.
Transparency advocates have noted that while the establishment of the register was a positive development, the law is ineffective if the penalties are not enforced. The register was introduced in 2022 following Russia’s invasion of Ukraine, to assist the UK government in targeting oligarchs and other kleptocrats.
Margot Mollat, a senior researcher and policy manager at Transparency International, expressed that while it was encouraging to see Companies House utilizing its powers, merely issuing penalties without collecting them fails to serve as a strong deterrent against non-compliance. Mollat emphasized that if the UK aspires to be the anti-corruption capital of the world, it must address enforcement gaps.
Individuals owning British property through offshore entities had until the end of January 2023 to register these entities and disclose their ownership at Companies House. Regulations enabling the imposition of penalties were introduced in June of that year. It was reported by the Financial Times that as of July 2023, 3,103 entities had not complied with the legislation, with Companies House noting that some of these entities might no longer exist.
Joe Powell, Labour MP for Kensington and Bayswater and chair of the All Party Parliamentary Group on Anti-Corruption and Responsible Tax, stated that although the register holds significant potential, it risks falling short of its intended purpose without adequate enforcement. Powell also remarked that the UK government needs to address remaining loopholes, particularly the use of trusts, which continue to obscure ownership through opaque company structures.
Companies House calculates the size of fines based on the council tax band of the property, with penalties ranging between £10,000 and £50,000 per property. Since the register’s inception, £700,000 has been collected from a total of £22.99 million in levied fines. The Companies House website warns that if a penalty is not paid within 28 days, the registrar may pursue court enforcement, potentially resulting in a charge being placed on the entity’s property.
Since the register’s introduction, over 30,000 entities have complied, helping to improve transparency in land and property ownership in the UK. Companies House mentioned that they collaborate with partners to identify overseas entities within the scope and ensure regulatory compliance, maintaining a focus on enhancing the quality of the register for increased transparency.