A NRCL has historically completed form SA700 in respect of its UK rental income. Despite being a Company, the NRCL would pay income tax (at 20%) on its profits.
There were further oddities in that technological advances had seemingly passed this niche of tax compliance by, with the forms still submitted by the humble postal system.
However, with effect from 6th April 2020, the taxation of property income by NRCL’s will be brought in to the UK corporation tax regime, resulting in:
- A corporation tax return will need to be submitted; and
- Profits now be by corporation tax at 19%, rather than income tax at 20%.
If you had previously filed your non-resident company tax return via postal form SA700, HMRC should have automatically registered you for corporation tax and subsequently provided you with your company Unique Tax Reference (UTR) (by 30th June 2020). If this is not the case, you will need to give HMRC a nudge for this.
Therefore, if you have a tax adviser to deal with your reporting matters, providing them with the new UTR will help avoid any filing delays and of course, the all-important £100 penalty!
Under the old income tax system, accounting periods ended on 5th April. As corporation tax rules now apply, the deadline for the return follows in line with 12 months after the end of accounting period.
Companies that are in this transitional position should notify HMRC of the date to which their corporation tax return will be prepared. Failure to provide the accounting date (if different to 5th April) could lead to penalties.
Things to Consider
If income tax losses were brought forward on the last SA700 return, these can be carried forward for use under corporation tax. However, be aware that these cannot offset capital gains made by the company which come under corporation tax.
Similarly, the same applies for capital allowance pools. Essentially it allows a sidestep transfer without giving rise to any balancing charges or balancing allowances.
Usually, where the company is of a size such that it is classed as ‘large’ for corporation tax purposes, then tax would be payable in quarterly instalment payments (QIPS). For a NRCL making the transition from income tax to corporation tax, QIPS will not take effect until Year 2.
Where finance costs have been incurred in the business, they will now be treated under CT rules i.e. as non-trading loan relationships.
A credit balance may remain in your company’s income tax account after all income tax liabilities for the tax year 19/20 and earlier years have been settled. If your company’s only source of UK income from 6th April 2020 is income from UK property, any credit balances should have been repaid to your company. You should have ticked the box on the 19/20 Non-resident Company Income Tax Return to claim a repayment of tax and provided the company’s UK bank details to enable the repayment to be made securely. If this has not yet been repaid, a call to HMRC may be necessary to initiate repayment.
If you feel that this may apply to you and would like assistance in dealing with such obligations, please give Arjan or one of the team a call.