TAX ON UK PROPERTY BUSINESSES – WHAT’S CHANGED?
From 6 April 2020 all non-UK resident corporate landlords (NRCLs) have been brought under the Corporation Tax rules and filing requirements. This means the end of paper tax returns for NRCLs and a requirement to file corporate tax returns and tagged accounts under iXBRL.
Below is a summary of the changes:
Tax rates and filing requirement changes
A final non-resident company income tax return (SA700) will be required to be filed by 31 January 2021. This will cover the period 6 April 2019 to 5 April 2020. Thereafter UK Corporation Tax returns will be required.
| PRE 6 APRIL 2020 | FROM 6 APRIL 2020 |
| Income Tax – 20% | Corporation Tax – 19% |
| Taxable profits calculated under income tax principles | Taxable profits calculated under corporate tax principles |
| Paper tax return | On-line tax return filing
Accounts to be “tagged” under iXBRL – to be filed with return |
| Filing date
31 January after relevant tax year |
Filing date
12 months after the accounting period end |
Tax payment date changes
Also, the tax payment dates change under the corporate tax system, as follows:
| PRE 6 APRIL 2020 | FROM 6 APRIL 2020 |
| Tax payment date
1st payment on account – 31 January in relevant tax year
2nd payment on account – 31 July after relevant tax year
Balancing payment – 31 January after relevant tax year (with last payment under IT regime being 31 January 2021) |
Tax payment date
9 months and 1 day after accounting period OR
If “large” – quarterly instalment payments (QIPs) – 2 due before end of accounting period |
Penal Corporation Tax rules impacting NRCLs
- Corporate interest restriction (CIR) for tax purposes
- Applies where company/group (if applicable) has >£2m p.a. of net interest expenses
- Limits tax relief for finance costs & interest to 30% of taxable profits above the £2m p.a.
- Loss relief restriction
- Carried forward losses against taxable profits>£5m p.a. restricted for tax relief
- Carried forward loss relief for profits >£5m p.a, restricted to 50% of the profits
But losses generated under the corporate regime can be used more flexibly.
Beavis Morgan can offer specialist advice to support your property business through this transition and beyond.
We can assist with:
- CT online registration with HMRC
- Acting as CT agents with HMRC to deal with all correspondence
- Preparing the CT tax computation and return – file with HMRC
- iXBRL tag the accounts – file with HMRC
- Advising on new tax payment dates (including QIPs if applicable)
- The transition period – apportion profits under the different tax rules (IT and CT)
- Consider whether the CIR will apply and plan
- Consider whether carried forward loss restrictions will apply and plan
- Prepare tax payable cashflow projections based on the aforementioned restrictions (CIR and losses)
- For groups of companies we can advise on:
- the applicability of the CIR group ratio method
- transfer pricing documentation requirements and adjustments on group finance costs, and
- thin capitalisation restrictions on tax deductible interest costs.
For a no obligation discussion, please contact or your usual Beavis Morgan Partner Beavis Morgan LLP.