Economic Crime and Corporate Transparency Bill (Thirteenth sitting)

Stephen Kinnock Excerpts

Committee stage
Thursday 17th November 2022 Public Bill Committees

The clause will clarify the contents of the register of overseas entities by addressing an issue over the clarity of the current drafting identified post implementation.

[Stephen Kinnock (Aberavon) (Lab)]

It is a pleasure to serve under your chairmanship, Ms Elliott. I want to make a few general points about registers of beneficial ownership and have a number of questions for the Minister, as a preamble to commenting on clause 135 specifically. Registers of beneficial ownership are not, of course, a new concept. We have had one for UK companies, namely the people of significant control register, since 2016. In that year, David Cameron made what would turn out to be the first of many promises to introduce a register of overseas owners of UK property, meaning that for the first time

“foreign companies that already hold or want to buy property in the UK will be forced to reveal who really owns them”.

Yet here we are, six and a half years and four Prime Ministers later, still discussing how to implement the register. After years of kicking the can down the road, it took the Russian invasion of Ukraine to jolt the Government into action. The first of this year’s economic crime Bills, now the Economic Crime (Transparency and Enforcement) Act, provided the legislative basis for the register of overseas entities, which at long last went live on 1 August.

As much as I welcome the fact that the register is now up and running, it remains very much a work in progress. The legislation passed earlier this year was rushed through on an expedited timetable, with just two weeks of debate. The need to amend what was clearly a hastily drafted law is reflected in the changes set out in clauses 135 to 140. Before addressing the substance of the clauses, it is worth taking stock of what progress has been made in setting up the register and, more importantly, what more needs to be done. According to Government figures, some 32,000 overseas companies are required to register with Companies House by 31 January. Between them, those companies own almost 100,000 properties in the UK. It was the Minister himself, in his previous incarnation as a Back Bencher, who argued forcefully back in March for the transition period during which those 32,000 companies would be required to register to be limited to six months.

Now that we have reached the halfway point in the process, I asked the Minister in written questions how many companies have now registered. Members might have reasonably expected the number to be somewhere in the region of 16,000, or half of the 32,000 total required. Imagine my surprise and disappointment when the Minister replied to my written question saying that, in fact, only 3,214 entities had registered as of last week; in other words, just 10% of those required. If progress were to continue at such a sluggish rate, the register would not be completed until 2025. I therefore ask the Minister whether he has a magic wand, and whether he intends to use it to ensure that the remaining 90% of companies comply with the registration requirement in the next three months.

I will also ask the Minister what he thinks is the reason for the astonishingly low number of registrations to date. But the answer to that question is in fact clear: the failure of the Government to enact the new law until the situation became urgent due to the war in Ukraine meant that the regulations and statutory guidance were sloppily drafted without consultation, leaving the entire framework riddled with holes and shrouded in uncertainty.

I hope the Minister will take the opportunity we have today to clarify some of the issues. Companies House has written to entities to inform them that they need to register, but the data used to contact them came from the Land Registry. That data is, in many cases, out of date. What assessment have the Government made of the accuracy of the contact information provided by the Land Registry? What steps is the Minister taking to ensure that everyone who is expected to register is at least made aware of the requirement in time for them to apply ahead of the 31 January deadline?

Will the Minister also confirm what additional resources, if any, have been made available to Companies House to support the introduction of the register? How many staff are now working to support its implementation? What preparations are the Government making to deal with companies that fail to comply before the deadline? Specifically, how will Companies House identify such companies and work quickly to impose the financial and criminal penalties that the Government have provided for? Will the Minister explain how the Government plan to deal with companies whose beneficial ownership cannot be verified? His Department’s guidance says that entities that claim to have no beneficial owner should provide information without a “managing officer”, but that term is not defined in the guidance. Can the Minister shed some light on this?

Clause 135 makes what appear to be minor technical changes to the wording of documentation to be held as part of the register. To the extent that those changes help ensure that the information on the register is giving as complete and as accurate a picture of companies beneficial ownership as possible, the changes are welcomed by the Opposition.

[Kevin Hollinrake]

I very much value the hon. Gentleman’s comments and reflections. There is no doubt at all that the measures are a work in progress; that is one of the reasons behind the Bill, of course. I enjoyed answering his questions in writing and we will no doubt correspond further on such matters. He is right to scrutinise the activities of Companies House, which I have sought to do as well.

Let me give a few facts that may help the hon. Gentleman. As of today, there are 3,893 registrations; that is a more up-to-date figure than the one I gave him on 11 November, which was about 3,500. That equates to about 400 in the past six or seven days, which illustrates that the number of registrations is increasing significantly. We always thought that there would be a last-minute rush to file because, as the hon. Gentleman knows, there are significant penalties for not doing so: up to £2,500 per day and a prison sentence of up to five years. That is the risk that those who do not comply are taking, which is pretty significant, so we always thought that there would be a last-minute rush.

To answer one or two of his other questions, eight people are working full time on the register of overseas entities and 20 are trained to handle registrations. They are deployed relevant to workload. There is no current backlog at His Majesty’s Revenue and Customs in this regard. A managing officer is defined in the Act as being akin to a director, secretary or manager.

[Stephen Kinnock]

On that point about staffing, I think the Minister’s point is that there will be a last-minute rush. Is he confident that the current staffing levels are sufficient to cope with that last-minute rush—that surge?

[Kevin Hollinrake]

I am not intimately involved in the management of the register. It would be interesting to see and that is a fair point. I will write to the hon. Gentleman. I have asked Companies House to provide us with that information, which it has done, about the activities it is undertaking to pursue people who have not yet completed their registration. We will continue to do that. In the meantime, I am happy to write to the hon. Gentleman on the points he has raised and, indeed, on his further point about making sure that we have enough staff to deal with the last-minute rush that we anticipate.

--- Later in debate ---

[Stephen Kinnock]

I thank the Minister for that. Does he have any thoughts on the interface between the Land Registry and the register of beneficial owners? It appears that a lot of the information on the Land Registry is seriously outdated. What steps are being taken to address that challenge, and does he see a risk in the communication between them?

[Kevin Hollinrake]

I do not see there being a risk of a lack of communication; they seem to be working together adequately. There is no doubt that some information is out of date. Many overseas entities have not kept their address details up to date, and many letters have been returned as undeliverable. Companies House is undertaking open-source research to try to identify up-to-date addresses, and we are working with stakeholders to raise awareness of the requirements and the deadline.

Companies House is used to dealing with large number of registrations, and we believe it can handle much larger volumes than it is receiving. The hon. Gentleman has asked some detailed questions and made some salient points that I want to follow up with Companies House in order to make sure that we can maintain the register properly, and I suggest we correspond on that basis.

Question put and agreed to.

Clause 135 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Scott Mann.)