Non-Resident Landlords (companies) will start paying corporation tax rather than income tax on their profits from 6 April 2020. HMRC has released new guidance concerning this change.
Key points to note from the guidance are that:
- HMRC is automatically registering non-resident landlords for corporation tax and issuing a corporation tax unique taxpayer reference (UTR). Companies should contact HMRC if they have not received a UTR by 30 June 2020 or if they already have a corporation tax UTR.
- Agent authorizations will not transfer. So,companies wishing to retain the services of an existing agent for corporation tax will need to authorize that agent to act for them in respect of corporation tax.
- Companies will need to register with HMRC online services to file their corporation tax return online. They may also need to register with Companies House if they have a permanent establishment in the UK.
- Transitional rules apply in respect of income tax losses and capital allowances.
- Relief for finance expenses are treated differently for corporation tax and the corporate interest restriction may need to be considered.
- Government will set up accounting periods to end on 5 April. Hence,if the company prepares its accounts to a different date, it must inform HMRC in writing.
- Payment dates will be different. However, HMRC will give consideration to the income tax regime and whether they need to give an application to reduce payments on account. There will be a one-off transitional rule in respect of quarterly installment payments for very large companies.
HMRC’s guidance does not apply to those companies that:
- have paid tax under non-resident landlord scheme and don’t have to file a tax return;
- start a UK property business on or after 6 April 2020;
- file an income tax return that is not a Non-resident Company Income Tax Return (SA700).
The guidance also states that non-resident corporate landlords will not have to register for corporation tax and file a company tax return for an accounting period if the liability to corporation tax is fully offset by tax deducted under the non-resident landlord scheme and it has no chargeable gains for the period.
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