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UK income tax for non UK residents

Jane Mackay, Partner, Head of Tax
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A new regime will apply UK income tax charge to certain receipts of non-UK resident persons from 6 April 2019. This income tax is being introduced instead of the proposed royalty withholding tax, following representations during the consultation.

The income tax will apply where a company in a low-tax jurisdiction receives income from intangible property where the income relates to the sale of goods or services in the UK. It applies regardless of whether there is a UK taxable presence.

The measure will only apply to companies with more than £10 million UK sales and will only apply to the proportion of the foreign resident entity's intangible property income that is derived from UK sales. Draft guidance on the compliance process to report and pay this tax is expected before April 2019.

This measure should only affect large multinationals who hold intangible property in low tax jurisdictions. It is one of several measures, including the diverted profits tax and the digital services tax that have an aim of reducing the opportunities for large multinationals to gain an unfair competitive advantage by holding their intangible property in low-taxed offshore entities. This thereby levels the playing field for businesses operating in UK markets. However, the draft legislation is widely drafted and further analysis of it will be required to see if it may catch unanticipated transactions.

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Jane Mackay
Jane Mackay
Partner, Head of Tax
Thames Valley