From 6 April 2020, non-UK resident companies that carry on a UK property business, or have other UK property income, will be charged to Corporation Tax, rather than being charged to Income Tax as at present.
This change comes shortly after the introduction of non-resident capital gains tax for commercial property and property rich entities which will apply from April 2019.
This measure is designed to deliver more equal tax treatment for UK and non-UK resident companies in receipt of similar income, and take steps to prevent those that use this difference to reduce their tax bill on UK property through offshore ownership.
As a result of extending the scope of Corporation Tax to income and gains that non-resident companies receive from UK property a number of provisions have been made to ensure that a non-UK resident company:
Non-resident landlord scheme
Non-resident companies are currently chargeable to UK income tax (capped at 20%) on their UK property business profits, with UK tenants and letting agents required to withhold tax from rent paid to non-resident landlords.
It is understood that, notwithstanding the switch to corporation tax, non-resident companies will still need to be registered under the non-resident landlord scheme (NRLS).
Whilst the current NRLS regulations (which are not being amended) exclude rental income both chargeable to corporation tax and attributable to a UK permanent establishment that will not extend to non-resident companies charged to corporation tax under the new scope.
Despite being within the scope of corporation tax, non-resident companies will still need to be registered under the non-resident landlord scheme in order to receive their rent gross
This measure is expected to affect approximately 22,000 non-resident company landlords who will now need to complete and file a Corporation Tax return.
If you would like to discuss how these forthcoming changes could affect you or your business, please contact our tax team.