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Budget 2020: Non-UK companies with UK rental profits

Author

Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

Non-UK companies with UK rental profits are subject to corporation tax from 6 April 2020

Background

This is an update on a measure previously announced and enacted.

Back in Finance Act 2019  rules were introduced that resulted in non-UK resident companies carrying on a UK property business, or have other UK property income, would be taken out of the Non-Resident Landlord Scheme. Instead, the profits of such an entity would fall within the scope of UK Corporation Tax (“CT”).

What is the Non-Resident Landlord Scheme?

There has been a longstanding special regime for non-UK resident holders of UK property who let their properties.  The holders of the UK property could be individuals, trusts or companies that are resident for tax purposes outside of the UK.

This is called the Non-Resident Landlord (“NRL”) scheme.

What’s changing?

From 6 April 2020, non-UK resident companies with a UK property rental income will be liable to CT at 19%. This is as opposed to being subject to income tax at the basic rate of 20%.

What do I / my clients need to do?

Those landlords affected by the measures will need to get to grips with this new reporting regime.

Instead of completing the old faithful NRL income tax return, they will now have to complete a corporation tax return.

Anything else?

Unused income tax losses should be carried forward into the new corporation tax regime.

Larger entities may be affected by rules that apply to restrict the use of losses brought forward and cap the deduction of interest expense.

What about Budget 2020?

The government has said that it will legislate in Finance Bill 2020 to make sure that the Finance Act 2019 rules work as intended. One assumes they have been alerted to some problems!

 

If you have any queries about these changes, or property tax issues at all, then please do get in touch.

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