Paying Corporation Tax if you’re a non-resident company landlord
Find out about paying Corporation Tax, instead of Income Tax, if you’re a non-UK resident company with UK property income.
Who is affected by the changes
From 6 April 2020, non-UK resident companies including those who invest in UK property through collective investment vehicles will need to pay Corporation Tax instead of Income Tax on profits from UK property.
This guidance does not apply to you if you:
- have tax deducted under the Non-resident Landlord Scheme and are not required to notify chargeability to Corporation Tax and have not received a notice to deliver a tax return
- file an Income Tax Return that is not a Non-resident Company Income Tax Return (SA700)
You will be automatically registered for Corporation Tax and sent a Company Unique Taxpayer Reference (UTR) if you have an existing UK property business as of 5 April 2020.
You should contact HMRC if you:
- have not received your UTR by 30 June 2020
- already have a company UTR
You will not be automatically registered if you start a UK property business on or after 6 April 2020.
If you have an existing UK property business
Once you have your UTR you can prepare to file your Company Tax Return.
What you’ll need to do
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Register with HMRC Online Services to file your Company Tax Return online.
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Get suitable software to prepare and submit your Company Tax Return to HMRC online.
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Calculate profits on which Corporation Tax is due using Corporation Tax rules and transitional rules.
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Tell us in writing if you prepare your company’s accounts to a date that is different to 5 April so we can update our records.
You cannot use HMRC free filing service to file your tax return.
You do not need to register with Companies House unless you have a permanent establishment in the UK.
You can find out more information about Company Tax Returns and paying Corporation Tax.
If your property is suitable for residential use, you may also have to pay Annual Tax on Enveloped Dwellings (ATED). Find out more about your separate filing and payment obligations for ATED.
Using an agent or adviser
If you have a tax agent or adviser acting on behalf of your company their existing authorisation will not be valid once you start paying Corporation Tax.
You will need to submit a new authorisation form to allow a tax agent or adviser to deal with your Corporation Tax on your behalf.
You can set up authorisation online or by completing a paper application.
Paying your Income Tax for the tax year 2019 to 2020
If your company’s only source of UK income after 6 April 2020 is expected to be income from the UK property business, you will not need to make any Income Tax payments on account for the tax year 2020 to 2021 and future tax years.
If you expect your company to have other UK income that remains chargeable to Income Tax after 6 April 2020, you will need to continue making Income Tax payments on account. You can consider reducing them as tax on UK property income will no longer form part of company’s Income Tax liability.
Credit held on your company’s Income Tax account
You may have a credit balance remaining in your company’s Income Tax account after all Income Tax liabilities for the tax year 2019 to 2020 and earlier years have been settled. If your company’s only source of UK income from 6 April 2020 is income from UK property, any credit balances will be repaid to your company.
You will need to tick the box on the 2019 to 2020 Non-resident Company Income Tax Return to claim a repayment of tax and provide the company’s UK bank details to enable the repayment to be made securely.
Transitional rules for calculating your Corporation Tax
There are transitional rules that you will need to take into consideration when calculating your Corporation Tax if you have an existing UK property business.
Accounting periods for Corporation Tax
Under the Corporation Tax rules, your company’s profits from a UK property business will be calculated by reference to accounting periods. These are aligned to the period for which your company prepares its annual accounts.
Your first accounting period for Corporation Tax will initially be set to start on 6 April 2020 and end on 5 April 2021.
If your company’s annual accounts are not prepared to 5 April, you need to let us know the date to which they are prepared so that we can update our records. Your accounting periods for Corporation Tax will:
- begin on 6 April 2020 and end on the same date as your company accounts if this is your first accounting period
- begin and end on the same date as your company accounts for your second and next accounting periods
Failure to let us know your accounting date, if different to 5 April, could lead to you being charged penalties for late filing of your Company Tax Return. This is because the date when we ask you to submit your tax return flows from the accounting year end that we have for you in our records.
If your accounting date is earlier than 5 April, you will need to send in your Company Tax Return earlier (within 12 months of the end of your accounting year-end).
You can find an
Pre-6 April 2020 Income Tax losses
If your UK property business is reporting a cumulative loss that is chargeable to Income Tax, this will be carried forward to your Corporation Tax. This applies if your company’s UK property business is still continuing at 5 April 2020.
You can offset this loss against future profits from the same UK property business or any Non-trade loan relationship profits relating to that UK property business.
The Income Tax loss cannot be relieved against Capital Gains where your company may be chargeable to Corporation Tax.
This type of loss is to be used in priority to any losses made on or after 6 April 2020 under Corporation Tax. It is not affected by the restriction to relief for Corporation Tax losses that arise on or after 1 April 2017.
No balancing charge or balancing allowance at 5 April 2020
If your company has claimed Capital Allowances under Income Tax, your Capital Allowances written down value pools as at 5 April 2020 will transfer to Corporation Tax without giving rise to a balancing allowance or a balancing charge.
Apportionment of written down allowances
When you move to Corporation Tax in April 2020, you will need to apportion Capital Allowances between your Income Tax and Corporation Tax. You should use the same apportionment method that you use for working out your company’s profits.
You can find an
Paying Corporation Tax if you’re a large or very large company
A one-off transitional rule will apply so that the instalments for large companies and the instalments for very large companies will not start until the second and next Corporation Tax accounting periods.
Relief for finance expenses
When working out your net taxable profit or loss from UK property, interest and other finance costs are not taken into account for Corporation Tax. They are worked out separately under loan relationship rules where they will normally be brought into account as a non-trading loan relationship deficit for the period.
Corporate Interest Restriction
When you calculate how much UK Corporation Tax you have to pay, there is a limit to the amount that your company or group can deduct for interest and other financing costs. This is known as a Corporate Interest Restriction (CIR).
The CIR does not apply to standalone companies or groups of companies that have net deductible interest and other financing costs of less than £2 million per annum.
Find out more about CIR.
Loan losses referable to a period before 6 April 2020
You cannot claim relief for losses under a loan relationship where the loss is referable to a period where your company was not liable to pay Corporation Tax. This usually happens where a non-UK resident company migrates to be a UK resident company.
This also applies if you incur a loss in a period in which you were liable to pay Income Tax and not Corporation Tax. For these companies this rule is limited to cases where the loss would not have been deductible under the Income Tax rules because it would have been capital.
The amount which is referable to the pre-transition period will depend on the specific facts and circumstances.
You can find an
Derivative contracts
Profits and losses from derivative contracts used as part of the UK property business are treated in a similar way to loan relationships. The credit and debit amounts of a derivative contract that have been entered into for the purposes of the UK property business are included in the calculation of the non-trading loan relationship profit or deficit for the period.
There are special rules called the Disregard Regulations that a company can opt into which enable you to ‘disregard’ fair value movements that arise from the accounting of derivatives. Instead the amounts from the derivative are brought into account in line with the hedged item.
You can find for non-UK resident company landlords who are party to a derivative contract for the purpose of their UK property business.
Starting a UK property business on or after 6 April 2020
If you start a UK property business on or after 6 April 2020, you will be required to notify us that you need to pay Corporation Tax. We will then register you for Corporation Tax and you will be required to file Company Tax Returns. Transitional rules do not apply and you must follow normal Corporation Tax rules.
You will not be required to notify your chargeability to Corporation Tax for an accounting period if both of the following conditions are met:
- your company’s liability to Corporation Tax (worked out using normal Corporation Tax rules) is fully offset by tax deducted under the Non-resident Landlord Scheme
- your company has no chargeable gains
If your property is suitable for residential use, you may also have to pay Annual Tax on Enveloped Dwellings (ATED). Find out more about your separate filing and payment obligations for ATED.
Submitting your Company Tax return
You must file your Company Tax Return online using third party software.
You must file company accounts and tax computations as part of your Company Tax Return. The computations and generally the accounts, must be in Inline eXtensible Business Reporting Language (iXBRL).
Last updated 18 March 2021 + show all updates
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The example of loan losses referable to a period prior to 6 April 2020 has been updated.
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Further guidance and examples for non-UK resident company landlords who are party to a derivative contract for the purpose of their UK property business, and a new paragraph 'The amount which is referable to the pre-transition period will depend on the specific facts and circumstances' have been added.
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This page has been updated with information about when you should receive a Company Unique Taxpayer Reference.
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First published.