Policy paper

Tax implications of the Register of Overseas Entities

Published 16 December 2022

The Register of Overseas Entities

Overseas entities that own UK property must use the Register of Overseas Entities to provide Companies House with information about their beneficial owners and relevant trusts by 31 January 2023.

Read more information about the register .

Why the register is important for tax

Offshore taxation is complex. It covers specialist subjects and there have been significant changes in the law recently. Whilst the vast majority of people and businesses pay the right amount of tax, mistakes are made.

Information on the register will be available to HMRC and will be used to identify tax non-compliance of:

• overseas legal entities
• overseas legal arrangements
• beneficial owners (including settlors, beneficiaries etc)

HMRC already uses information obtained through international agreements to identify offshore non-compliance; the information received from the register will increase transparency, making it easier than ever to make sure the correct tax is paid.

You will need to understand how the register will affect you if you:

• manage or administer an overseas entity
• are a trustee of a non-UK trust
• are a UK resident beneficial owner, or can benefit from the UK property

If you manage or administer an overseas entity

Non-UK resident companies have long been chargeable to UK tax on profits of a trade carried on in the UK through a permanent establishment in the UK. Here are some of the more common recent developments that may affect overseas companies owning UK property.

Stamp Duty Land Tax (SDLT) charge

Since 21 March 2012, companies purchasing a residential property in England and Northern Ireland over a certain amount are subject to a flat rate 15% Stamp Duty Land Tax (SDLT) charge.

Reliefs are available if the property is intended to be used for a particular commercial purpose.

Annual Tax on Enveloped Dwellings (ATED) returns

Since 1 April 2013, companies owning UK-residential property worth over a certain amount must file Annual Tax on Enveloped Dwellings (ATED) returns.  From 1 April 2016, the value threshold has been £500,000. There are reliefs available if the property is used for a particular commercial purpose.  All reliefs must be claimed in an ATED return.

Gains made on UK residential property

Since April 2015, gains made by overseas companies on UK residential property held as an investment have been taxable. This means overseas companies that have disposed of this type of property since April 2015 should have paid tax on any gains.

UK permanent establishments

A non-UK resident company dealing in or developing land in the UK may have created a UK permanent establishment and become liable to UK tax on part of its trading profits, including periods before 5 July 2016.

Disposals of UK land by non-UK resident companies

From 5 July 2016, disposals of UK land by non-UK resident companies are subject to UK Corporation Tax where they are dealing in or developing land in the UK. There are complex rules determining the taxation of transactions in UK land.

Gains made on UK non-residential property

Since April 2019, gains made by overseas companies on UK non-residential property held as an investment, or from rights or interests in companies that derive at least 75% of their value from UK property or land, have been taxable. This means overseas companies that have disposed of this type of property or entity since April 2019 should have paid tax on any gains.

Overseas companies’ UK rental income

Before April 2020, overseas companies’ UK rental income was subject to Income Tax. Since April 2020, rental income has become subject to Corporation Tax. This means there may be restrictions on interest (amongst other provisions) that may affect how profits are calculated.

There may also be a requirement to adjust interest deductions under Transfer Pricing rules or the Corporate Interest Restriction, or wholly and exclusively provisions, including periods prior to April 2020.

SDLT surcharge

Since 1 April 2021, non-UK resident companies purchasing a residential property in England and Northern Ireland have been liable to a SDLT surcharge.

Central management and control

Additionally, if a non-UK incorporated company is, in fact, centrally managed and controlled in the UK, for example, by UK resident beneficial owners, they will be considered UK tax resident (subject to being treated as non-UK resident under a Double Taxation Agreement) and chargeable to Corporation Tax on worldwide profits. Depending on the facts and circumstances, this may result in the company being chargeable to more UK tax than if it was non-UK resident.

If you are a trustee of a non-UK trust

Non-resident Capital Gains Tax

Non-resident trustees may be liable to non-resident Capital Gains Tax on disposals of:

• UK property or land
• rights or interests in companies that derive at least 75% of their value from UK property or land

Inheritance Tax on UK residential property

Since April 2017, UK residential property is no longer excluded property. Trusts owning UK residential property, whether directly or indirectly, may now be liable to Inheritance Tax. For example, 10-year anniversary charges from the date of settlement.

Domicile of settlor

Inheritance Tax may apply to a settlement made by a person domiciled or deemed domiciled in the UK at the time the settlement is made. Also, if any changes to a settlor’s domicile occur and the trust is then later added to or the assets included in the trust are changed/amended (for example, the asset is transferred to another trust) there may be Inheritance Tax implications.

Situation of settled property

Regardless of the settlor’s domicile, if property, at the time it was transferred into the trust, was not situated outside of the UK, there may be Inheritance Tax implications.

SDLT surcharge

Since 1 April 2021, non-resident trusts and some UK resident trusts which have non-resident beneficiaries have been liable to a SDLT surcharge when purchasing dwellings in England and Northern Ireland.

If you are a UK resident beneficial owner, or can benefit from the UK property

Transfer of Assets Abroad (ToAA)

Individuals may be liable to Income Tax under the Transfer of Assets Abroad (ToAA) provisions if they have made or procured a transfer of assets and, as a result, income has become payable to a non-resident landlord. They may also be liable if they receive, or are entitled to receive, a capital sum connected with the transfer.

Individuals may also be liable to Income Tax under the ToAA provisions if they haven’t personally transferred assets but benefit from a transfer made by somebody else; for example, occupying a property and not paying rent at market value.

Attribution of chargeable gains

Chargeable gains not otherwise subject to tax may be attributable to UK-resident participators in an overseas close company. Where the overseas company is within a large structure a gain can be attributed up to the first tier of non-resident trusts in the chain of interests. That gain may then be attributed to a UK resident settlor or beneficiary.

Attribution of trust income

Income from trusts may be attributable to UK-resident settlors and beneficiaries.

UK source income and the remittance basis

Individuals who are UK resident but are not domiciled in the UK can choose to pay tax on the remittance basis, where foreign source income and gains are only taxed if they are remitted (brought) to the UK. Income from UK property held through an offshore entity is UK source income and it is not taxed on the remittance basis.

If you’re concerned the right amount of tax hasn’t been paid

If you’re not sure the right amount of tax has been paid, you must come forward and tell HMRC as soon as possible.

To make a disclosure, you should use the Worldwide Disclosure Facility (WDF).

If you have committed fraud and want to tell us, you should use the Contractual Disclosure Facility.

When making a disclosure using the WDF, you should let HMRC know that you are making the disclosure linked to obligations with the Register of Overseas Entities. You can do this when making the ‘notification of intent’ and the full ‘disclosure’:

• when making the notification of intent, you will be asked ‘How did you hear about making a notification?’ - you should answer ‘A letter, article, or other media about the Register of Overseas Entities’
• you will be asked a similar question when making the full disclosure and you should give the same answer

Please use the media code CI167O in both submissions.

You should also note that:

• HMRC has extended time limits for assessing Income Tax, Capital Gains Tax and Inheritance Tax where the loss of tax involves an offshore matter or transfer
• there are increased penalties for non-compliance involving offshore matters and transfers

These are complex areas of tax and you should consider taking independent professional tax advice before deciding what to do next.