13 December 2019
HMRC have announced that in the New Year they will be contacting non-resident corporate landlords to allocate them a corporate tax reference. From April 2020, they will be taxed under the corporation tax rules instead of the income tax rules.
Changes to tax rate
Corporate non-resident landlords with UK properties need to consider the effect of the change. Whilst the change is likely to reduce the tax rate from 20% income tax rate to the current 19% corporation tax, the rules on interest and other deductions may change. Under corporation tax, there are also rules around when interest can be deducted on the payment. If you are a large company or part of a large group, there may also be a cap.
Reporting Capital Gains
Another issue that non-resident landlords miss is the report of capital gains on the sale of UK property or shares in a property company (defined as 75% of the company’s income being derived from property letting). With these transactions, there is a reporting requirement to make a return and pay the tax with 30 days of the sale.
So, it is important that non-resident landlords plan ahead when selling a UK property or shares in a company with UK property.
If you do not hear from HMRC before 31st March, we would recommend contacting HMRC to ensure the non-resident landlord is registered for corporation tax.
For more information on the changes from income tax to corporation tax and how this may affect you as a landlord, contact a member of our tax team today.
Alternatively, fill out our contact form here.
