HMRC have released guidance on the new rules for non-resident companies owning UK property and when they move from income tax to Corporation Tax in April 2020.

Non-resident companies owning UK property are currently subject to income tax under the non-resident landlord scheme.  However, the Finance Act 2019 introduced legislation to move such companies into Corporation Tax (CT) with effect from 6 April 2020. This follows the change in April 2019 whereby non-resident companies making gains on UK property became subject to Corporation Tax instead of Capital Gains Tax and ATED CGT was abolished.

The HMRC guidance clarifies some important points about how the new rules will operate from April 2020:

  • Non-resident companies will not be required to register for Corporation Tax and file Corporation Tax returns for an accounting period if:
    • their liability to CT is fully offset by tax deducted under the Non-resident Landlord Scheme,
    • they do not have any chargeable gains for the period.
  • Affected companies will be automatically registered for Corporation Tax and sent a company Unique Taxpayer Reference (UTR) by 30 June 2020.
  • They will need software (or to use an agent) to submit their CT returns online as the HMRC free filing service will not be available. Existing agent authorisations will not be valid for CT and new ones will need to be submitted.
  • The first accounting period for Corporation Tax start on 6 April 2020 and end on 5 April 2021. Where a company’s accounts are not prepared to 5 April, their accounting periods for CT will:
    • begin on 6 April 2020 and end on the same date as the company accounts for the first accounting period
    • Begin and end on the same date as the company accounts thereafter.
  • Companies must tell HMRC in writing if they prepare accounts to a date other than 5 April.
  • Companies do not need to register with Companies House unless they have a permanent establishment in the UK.
  • Pre-April 2020 income tax losses will be carried forward and can be offset against future profits, including those from non-trading loan relationships, from the same UK property business but cannot be used against future chargeable gains from the business.
  • There will be no capital allowance balancing allowances or charges at 5 April 2020. Instead, capital allowances will be apportioned between income tax and CT pre and post 6 April 2020.
  • A one-off transitional rule will apply so that installment payment for very large companies will not start until the second and next CT accounting periods.

Links to our subscriber guides:

Non-resident landlord scheme

Different ways of taxing UK property

Non-resident CGT: UK property

Losses: trading and other losses

Link to HMRC guidance:

Paying Corporation Tax if you’re a Non-resident company landlord