UK Exchange Control (‘EC’)

Abstract

The UK legislation governing exchange control is the Exchange Control Act 1947 which in effect makes void transactions between residents and non-residents (these terms are defined later) without appropriate consent being obtained. The Treasury is empowered under the Act to administer exchange control but has delegated most of its powers to the Bank of ‘England (‘the Bank’) which is responsible for the administration of the Act. It is pertinent to note that although the Treasury is ultimately responsible for both EC and Taxation (through the Inland Revenue) there is in practice no connection or exchange of information. Each of these bodies has its own regulations and each is independent of the other. The Bank in turn has delegated much of its powers to agents who carry out the most routine matters on the Bank’s behalf. These agents (called ‘Authorised Depositories’) are Banks, Stockbrokers, Solicitors and sometimes Accountants. The delegation is carried out by sending official Notices containing the EC rules to its agents. These Notices are updated by supplements. Some routine transactions e.g. payment of minor non-resident invoices are within the powers of an agent but there are many which are simply outside the powers of the agents e.g. borrowings of foreign currencies by UK companies and allotment or issue of shares in private companies to non-resident shareholders. In such cases official Bank consent must be applied for before the transaction is effected. Because the Notices are basically of an administrative nature, the Bank often has a considerable degree of latitude over individual cases and the current practice should be ascertained before applying for any consents. Notices and current practice can change at very short notice.