From 6 April 2020, non-UK resident companies must pay corporation tax instead of income tax on their profits from UK property.

The change means your property business will be subject to corporation tax (CT) on its UK property income, whether it’s a UK or an offshore company.

Before 6 April 2020, your non-UK resident company would have been liable for income tax (IT) under the Non-Resident Landlords Scheme (NRLS).

Are you registered for corporation tax?

If your overseas-based UK property business was in place on or before 5 April 2020, HMRC should have automatically registered you for corporation tax and sent you a unique taxpayer reference (UTR). If not, you’ll need to ask HMRC for one.

And if this business was set up from 6 April 2020 onwards, you must ask HMRC to register you for CT, so you can file a company tax return.

What else do you need to do?

You must report your company’s UK income by completing a CT600 return online. On top of that, you’ll need to prepare your accounts using the iXBRL system.

Your first accounting period for corporation tax began on 6 April 2020. But the tax return is completed based on your company’s accounting period, rather than the 6 April to 5 April tax year. And if your company’s annual accounts aren’t prepared in line with the tax year, you must tell HMRC.

The filing deadline for your CT return is 12 months from the end of your accounting period.

Tax rates

The main rate of corporation tax is 19% but this will rise to 25% on profits over £250,000 from April 2023.

What do the changes mean for you?

The Non-Resident Landlords Scheme has been in place for many years. And if you live outside the UK and own UK property, you probably have a good understanding of the scheme.

The move to corporation tax for non-resident companies comes with many challenges.

If you’re affected, it’s important that you take UK tax advice, so you can fully understand the new rules and what your obligations are.

You’ll also need to consider whether you should change how you run your business. For example, it might be a good idea to bring the control and management of your company back to the UK, instead of basing it offshore. But any decision should be made based on your company and your individual circumstances – every case is different.

Property tax advice

Our property tax specialists will help ensure your property business is tax efficient and compliant with the law.

You can benefit from our expertise and knowledge, whether you’re a property developer, landlord or property investor.

Get in touch with the Churchill Taxation team today on 07813 434195 or email stephanie.churchill@churchilltaxation.co.uk

Steph Churchill

Stephanie Churchill

Managing director & co-owner of Churchill Taxation