Non-UK resident companies that own UK property must now register for Corporation Tax

You may already be aware that recently there have been several changes to UK taxes and we are putting together a series of blogs to explain the key points. This blog focuses on the change to the type of tax paid by non-UK resident companies on profits from UK property.

Click here to read information about our blog regarding Capital Gains Tax.

From 6th April 2020, non-UK resident companies (including those investing in UK property through collective investment vehicles) will need to pay Corporation Tax on profits from UK property instead of Income Tax.

Previously, these companies paid Income Tax on rental income using a return known as a SA700. The Income Tax payable was 20% of profits.

By making this change, the government is aligning the tax regime for non-UK resident companies with that for UK companies that own UK property and already pay Corporation Tax on their profits.

A different type of tax return for non-UK resident companies

From April 6th 2020, non-UK resident companies must complete a different type of tax return – a Corporation Tax return instead of the previous SA700.

A lower rate of tax

Non-UK resident companies previously paid a flat rate of 20% Income Tax on their profits from UK property.

The rate of Corporation Tax payable is 19% so these companies will benefit from a reduction in the rate of tax payable.

You can find more information about Corporation Tax on the HMRC website:
https://www.gov.uk/guidance/paying-corporation-tax-if-youre-a-non-resident-company-landlord

Registering for Corporation Tax

If you have an existing UK property business as of April 5th 2020, you will be automatically registered for Corporation Tax and HMRC will send you a Company Unique Taxpayer Reference. You should have received this by June 30th 2020. If you haven’t received this, you must contact HMRC.

Some companies may already have registered for Corporation Tax

Non-UK resident companies that have made a Capital Gain on the sale of a property since April 6th 2019 will already have had to register for Corporation Tax. They will therefore have paid Corporation Tax instead of Capital Gains tax following the sale of the property.

Again, there is a saving here too as the Corporation Tax rate is 19% rather than the Capital Gains Tax rate of 20%.

More information is available at:
https://www.gov.uk/guidance/capital-gains-tax-for-non-residents-uk-residential-property

What to do if you start a UK property business on or after April 6th 2020

If you start a UK property business on or after April 6th 2020, you must notify HMRC that you need to pay Corporation Tax. You will be registered for Corporation Tax and will be required to file Company Tax Returns and follow Corporation Tax rules.

What should non-UK resident companies do next?

Hopefully, we have clarified what non-UK resident companies should do but of course circumstances vary.

We already assist landlords with completing different types of tax return – we calculate and submit returns on behalf of many of our overseas clients.So, if you need further guidance, please email us with your details and we will be happy to help.

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About the Author

Vidhur studied Management Sciences at Manchester University, focusing on accountancy, before going on to qualify as a chartered accountant. He began his career working in investment banking but after several years decided to join Benham and Reeves in 2003. Since then he has expanded the finance department, introducing a broader range of services to encompass all financial aspects of property investment, from collecting rent through to completing tax returns (or ATED returns for overseas companies). Read more about Vidhur Mehra here - Read full profile

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