HMRC has published ‘Non-resident companies chargeable to Income Tax and non-resident CGT: summary of responses’. This explores whether non-resident companies with UK sourced property income or gains should pay corporation tax. It concludes that these companies should move into corporation tax.

Following the introduction of the Corporate Interest Expense restriction and Corporate Carried-forward Loss reform the government is concerned about potential avoidance due to the mismatch that can occur when non-resident landlord companies are subject to both the income tax and corporation tax regime.

The choice was either to amend the income tax rules or move more companies into corporation tax (CT). The government had decided to move the UK property income of non-UK resident companies within the corporation tax regime.

  • This change will include non-UK resident companies who have invested in non-resident property unit trusts in respect of UK property.
  • The change will apply with effect from 6 April 2020.

A non-UK resident company that has chargeable gains on the disposal of UK residential property under the existing Non-Resident CGT regime will be charged to corporation tax instead of capital gains tax as at present.

  • All gains arising on all disposals of UK immoveable property by non-UK resident companies will be taxed from April 2019.
  • Further consideration to ATED-related gains will be given alongside the technical consultation of this policy.

The non-UK resident company will be required to register for CT Self-Assessment (CTSA), and will return the gain or loss within the CTSA framework, and pay any tax to the CTSA timescales as applicable.

The government intends that:

  • The existing rules for Loan Relationships, financial derivatives and the anti-hybrid rules, to apply to non-UK resident companies with a UK property business, in the same way as they are applied to a UK resident company with a UK property business outside of a REIT.
  • The rules on management expenses to be applied to non-UK resident companies carrying on a UK property business, or in receipt of other UK property income, in the same way as they are applied to UK resident companies.
  • The rules for loss relief and group relief will apply to a CT property loss from a UK property business of a non-UK resident company in the same way as they are applied to a UK resident company. Terminal loss relief is only available in respect of trading losses and that rule applies for all companies, UK resident or otherwise.
  • Corporation tax losses and income tax property losses are to be carried forward separately so that the reform to the CT loss relief rules will apply in the same way to the corporation tax losses of non-UK resident companies as to CT losses of UK resident companies. Income tax losses brought into the CT regime will be able to be used to offset future profits of the UK property business.
  • Transitional provisions will be introduced to ensure that no profits fall out of account or are doubly taxed as a result of the change. 

A technical consultation will follow.


Our summary: Consultation: Non-resident companies

At a glance guide: CGT: different ways of taxing UK residential property

HMRC response: Non-resident companies

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