The tax year 2019-20 was the last in which non-resident landlord organisations with a property business in the UK were required to file an SA700 under income tax laws.
This means that, as of 6 April 2020, any non-resident landlord company with property in the UK – including those that invest through collective investment vehicles – will now be taxed under the UK corporation tax regime. A form CT600 must now be filed each year.
Key filing obligations under the new regulations
If you’re a non-resident landlord, you should familiarise yourself with the following:
1. CT600 forms are filed online, unlike the old SA700 form.
2. Your first form CT600 will cover the period from 6 April 2020 to the end of your company’s accounting period (if this differs from the end of the UK tax year). This means you are no longer obliged to follow the UK tax year and can select an accounting period that works better for your activities. HMRC must be notified of the change in accounting period.
3. The deadline for submission of a form CT600 is 12 months from the end of the relevant accounting period.
4. Corporation tax is typically payable 9 months and 1 day after the accounting period ends. This means the tax must be paid before the actual deadline for filing your form CT600.
5. Any company with taxable profits exceeding £1.5m may need to make accelerated quarterly corporation tax payments, though this limit is divided by how many active group companies are present. This should not apply before the second accounting period.
6. HMRC will automatically register non-resident landlord companies for corporation tax and provide a new Unique Taxpayer Reference. These will replace the ones you previously entered on your SA700. Please inform your accountant if your new UTR has not been sent to you by the end of June 2020.
7. Companies are only required to register with UK Companies House or submit accounts if they have a permanent establishment in the UK.
8. Capital gains will be taxable at corporation tax rates through your CT600 in line with regulations from 6 April 2019. If you need to repost any UK property disposals in the year to 5 April 2020, you will need to submit separate CT returns.
Important considerations for corporation tax
With this change to the corporation tax regime now in effect, you may also want to consider the following:
1. The corporation tax rate in the UK is 19%, so your UK tax liability should be reduced slightly.
2. Any ‘income tax’ capital allowances pools that were present on 5 April 2020 will transition to corporation tax without any balancing allowance or charge.
3. Any losses at 5 April 2020 will be carried forward and set against future corporation tax property business or non-trade loan relationships. Priority will be given to these over any subsequent losses you make under the corporation tax regime.
4. Loan relationships are sums paid received with regards to monetary debt arising from lending – typically interest. These are considered separate to profits from your property business and are subject to corporation tax rates.
5. Any losses brought forward that exceed £5m are restricted to £5m plus 50% of all profits that exceed £5m. These are complex rules and you are advised to consult Fusion for advice if you may be affected by this.
6. Certain losses may also be available to surrender for group relief to the group’s other companies.
7. If a company or group incurs financing costs like interest that exceed £2m in a 12-month period, Corporate Interest Restriction may apply. This will limit the amount that can be set against income in that particular year. Again, this is a complex area and Fusion can offer guidance and clarity for your company.
For expert guidance and assistance making the transition to the new corporation tax rules, non-resident corporate landlords can Contact Fusion Consult. We are a multi-disciplinary business consulting firm with an in-house team of highly-skilled consultants. With expertise in International Taxation, our input will ensure the switch to corporation tax doesn’t disrupt your business at all.