Recent changes to the taxation of UK property held by non-UK residents have meant a fundamental reshuffle of tax planning in the lettings market. The changes include the taxation of rental income received by non-resident corporate landlords under corporation tax instead of income tax, with effect from 6 April 2020.
Experts at Whitley Stimpson, one of the largest independent accountancy practices in the area, with offices in Banbury, Bicester, High Wycombe and Witney, says it is important that corporate landlords based overseas are aware not only of these changes, but also of the updated guidance and alterations to the non-resident landlord scheme regulations.
Val Buzzard, a director of the firm based at the Banbury office, explains that certain companies could be exempt from the new rules:
“Under these changes, a non-resident company will not be required to register for corporation tax and file a company tax return for an accounting period if its liability to corporation tax is fully offset by tax deducted under the Non-resident Landlord Scheme, and it has no chargeable gains for that period.”
HMRC has said that it will automatically register affected companies for corporation tax and will be sending them a company Unique Taxpayer Reference, known as a UTR. Nevertheless, there has been some controversy surrounding this plan, with professional bodies believing that the taxman should copy this correspondence to existing agents. HMRC say this would breach taxpayer confidentiality. HMRC is therefore asking agents to request their clients to forward on any relevant correspondence. Normal corporation tax rules will apply, so an accounting period no longer needs to end on 5 April. If this isn’t the case, a company needs to notify HMRC as to what filing date it will use.
There are further things to be aware of, as Val points out:
“These changes affect a number of other steps in the taxation process: from the way companies register, to the transitional rules in respect of income tax losses and capital allowances and also the relief for expenses and payment dates. It’s important that both companies and clients are clear and ready for these changes ahead of April.”
Finally, the guidance does not apply to companies that have tax deducted at source from the rental income. Neither will the guidance apply if they are starting a UK property business after 6 April 2020 as they will automatically fall under the new regime.
For further details on these issues Whitley Stimpson has a team of specialists who advise on all tax matters for both businesses and individuals. Please contact Val Buzzard, on 01295 270200 or valb@whitleystimpson.co.uk