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Non UK resident companies: new tax rules
Caroline Fleet, Partner, Tax
From April 2020, non-resident companies that currently pay income tax, due to their holding of UK property, will fall within the scope of corporation tax. 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.
There are a number of "transitional rules" for companies in such a position for example to ensure that there is no disposal event for capital allowances purposes and that income is not taxed twice or an expense is only relieved once. In addition any carried forward income losses from the period up to 5 April 2020 will be available to offset against the future UK property profits of that company. Unlike other brought forward corporation tax losses (since April 2017) it is not subject to the 50% restriction on its future use, however such these losses can also not be surrendered as group relief.
Despite being within the scope of corporation tax, such companies will still need to be registered under the non-resident landlord scheme in order to receive their rent gross.
Companies affected by these changes need to begin (if they haven’t already) to consider the consequences of what being within the scope of Corporation tax will mean.
Some of the implications to consider are.
Will interest restrictions be applied because of the Corporate Interest Restrictions Rules for groups with more than £2 million of annual interest expense?
If yes, does the company need to consider the use of other tax assets such as capital allowances?
Are the financial statements in a suitable format for submission to HMRC?
What returns will be required? There will be an income tax return for the period up to 5 April 2020 and then a corporation tax return from 6 April to the accounting period end (provided that this is 12 months or less).
Has the company registered for corporation tax after April 2020?
Will tax be accelerated because the company falls within the Quarterly Payments Regime?
If you would like to discuss how these forthcoming changes could affect you or your business please contact Caroline Fleet or your usual contact.
Head of Real Estate
+44 (0)207 842 7215
Read Caroline's full CV