• From 6th April 2020, non-resident companies that own UK real estate will no longer pay income tax on their UK rental income but will instead be subject to Corporation Tax.
• The headline rate of Corporation Tax is lower than Income Tax by 1%.
However, there are some factors you should consider if you think this may apply to your company:
• If your company holds its property as trading stock you will already be subject to Corporation Tax.
• If your company receives rental income, from 6 April you will pay Corporate Tax. Non-Resident Landlord Scheme registration is still necessary.
• If your company has not received a notification from HMRC about Corporation Tax Reference, then you will need to arrange your own registration.
• As of April 2020, if your company has any brought forward capital losses, they will be subject to 50% restriction.
• If your company is part of a group, you should consider group relief provisions, group payment arrangements or Corporate Interest Restrictions.
• If your company or the wider group uses any hybrid instruments, e.g. convertible preference equality certificates, or is subject to US Check-the-Box election or similar, then you need to consider anti-hybrid provisions which will deny deductions.
• If your company undertakes land remediation work or R&D work then additional deductions may be available to you as a Corporate Tax payer.
• If your company have any interest costs you need to consider withholding tax, transfer pricing provisions and any loans from participators.
• If the net interest expense with the UK corporate group is more than £2 million then Corporate Interest Restrictions will apply.
• If you have any questions about how, or whether or not, Corporation Tax will apply to your company, please contact Harry Pattihis for further advice.
This article is prepared with the intention of providing general information on the changes in law. Philip Ross Solicitors accept no responsibility for errors it may contain and the coverage of the topic is not comprehensive. You are advised to speak directly to the writer or another partner within this firm within any specific enquiries on the topic addressed.
Harry’s understanding of the offshore property investor’s requirements has enabled him to provide a comprehensive and bespoke service. He acts for private investors, joint ventures and lenders based in the UK and offshore on commercial residential transactions and restructuring.