The rules for non-resident company landlord have changed significantly from 6 April 2020. The latest changes imply that the non-resident companies which carry on a UK property business or have other UK property income are now moved from the income tax regime to the corporation tax regime. As a result, the non-resident company landlords will now need to comply with the corporation tax return rules applicable to UK companies.
The accounting period for Non-Resident Corporation tax
Under the previous regime of Non-Resident Company Income Tax Return (SA700), the non-resident company landlords were taxed based on the tax year (6 April to 5 April).
However, since 6 April 2020, the companies are chargeable to corporation tax based on the company’s accounting period. This means that the figures for the corporation tax can be taken from the financial statements of the non-resident companies (with relevant adjustments required for corporation tax purposes).
For the first year of transition from old SA700 regime, the accounting period will be from 6 April 2020 to the end of the first accounting period since then.
Suppose the non-resident company’s year-end date is 31 December each year. In that case, the first corporation tax return will be from 6 April 2020 to 31 December 2020 and annually ending 31 December after that.
What is the rate of corporation tax?
The rate of corporation tax is 19% until 31 March 2023. The main corporation tax rate is going up to 25% from 1 April 2023. The rate of corporation tax for various sizes of companies is summarised as below:
|
Rate Band |
2021/22 |
2022/23 |
2023/24 |
|---|---|---|---|
|
Main rate – Profits above £250,000 |
19% |
19% |
25% |
|
Small profits rate – Profits less than £50,000 |
19% |
19% |
19% |
|
Profits between £50,000 to £250,000 |
19% |
19% |
26.5% |
Under the new corporation tax rules from 1 April 2023, the lower and upper limits will be proportionately reduced for short accounting periods and in case of associated companies. A company is associated with another company at a particular time if, at that time or at any other time within the preceding 12 months:
- one company has control of the other,
- both companies are under the control of the same person or group of persons.
How taxable profits is calculated?
Although the corporation tax is the same for all types of income & gains (except ATED related gains), there is a difference in calculating taxable profit for corporation tax. The income & gains are divided between mainly following categories:
- Trading profits
- Profits from UK Property Business
- Surplus from non-trading loan relationships
- Net chargeable gains
- Non-trading income
- Miscellaneous income
Does Section 24 apply to a Limited Company?
No, it does not. The good news is that the Section 24 interest relief restriction applies only to individual landlords. Many property investors are moving to a corporate structure because of Section 24.
When and how should the corporation tax return should be filed to HMRC?
The Corporation Tax Return (CT600) should be filed within 12 months of the end of the accounting period. For example, the filing deadline for the year ended 31 December 2018 is 31 December 2019.
Together with the CT600, the company is also required to submit a set of accounts, any other detailed analysis & computations necessary to show that the return is complete and correct. The corporation tax return must be filed online together with an iXBRL tagged set of accounts. We prepare the CT600 simultaneously with the company accounts for the companies.
What is the deadline for paying the Corporation Tax?
For small companies, the corporation tax is due nine months & 1 day after the end of the chargeable accounting period. For example, the corporation tax for the year ended 31 December 2021 is due on 1 October 2022.
The corporation tax needs to be paid on an instalment basis for large companies.
What are the main changes between Pre-Apr-20 (SA700) Regime and Post-Apr-20 (Corporation Tax) Regime?
Following is the summary of the main differences in rules between the old SA700 regime and the new Corporation tax regime:
|
Areas |
pre 6 April 2020 |
from 6 April 2020 |
|---|---|---|
|
Accounting/Tax Period |
Tax return for the period ending 5 April each tax year (e.g., 5 April 2020) |
Tax return for corporation tax accounting period which generally follow usual financial year-end (e.g., 31 December 2021) |
|
Filing Deadline |
31 January of the following year of the tax year (e.g. 31 January 2021 for the tax year ending 5 April 2020) |
Online filing of corporation tax return – due 12 months from end of the AP |
|
Filing Documents |
Paper returns with no requirement to file accounts |
Online filing of corporation tax return (CT600) via approved software together with iXBRL tagged financial statements |
|
Tax rate |
20% income tax rate |
19% corporation tax rate |
|
Tax Payment Deadline |
Payments on account due on 31 January and 31 July |
Payment due nine months and one day after end of AP or under quarterly instalments |
|
Tax rate and tax due dates |
20% income tax rate Payments on account due on 31 January and 31 July |
19% corporation tax rate Payment due nine months and one day after end of AP or under quarterly instalments |
|
Tax losses |
Losses can be carried forward against property income. No group relief is available. |
Property losses under old regime can generally be offset against post April 2020 UK Property business profits. Group relief available. |
|
Sale of Property |
Register with HMRC within 30 days (residential) and 90 days (commercial) of disposal |
Reported within the corporation tax return |
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