2019/20 was the last tax year in which non-resident landlord (NRL) companies with a property business in the UK needed to file a form SA700 under the income tax regime. As of 6 April 2020, NRL companies (including those that invest in UK property through collective investment vehicles) are taxed under the UK corporation tax (CT) regime and will file form CT600 annually.
New filing obligations
If you’re a non-resident landlord, points to note include:
- Form CT600 is filed online, unlike the SA700 form which was filed on paper.
- The first form CT600 will cover the period from 6 April 2020 to the end of the accounting period of the company if this is different from the end of the UK tax year (5 April). The NRL company is therefore no longer required to follow the UK tax year and may now choose an accounting period which is more suitable for their activities. As your agents, we would have to write to HMRC to let them know of the change in accounting period and there will also be some transitional years where the new accounting period is introduced.
- Forms CT600 are due for submission 12 months from the end of the accounting period that they cover – unlike forms SA700 which were due by 31 January following the end of the tax year.
- CT is normally payable 9 months and 1 day after the end of an accounting period, rather than on the 31 January and 31 July dates that apply for income tax. Tax is therefore payable before the filing date for the related form CT600.
- Companies with taxable profits above £1.5m may be required to make accelerated quarterly payments of CT although this limit is divided by the number of active group companies. However, these should not apply before the second CT accounting period (unless exceptionally profits exceed £10m for these purposes).
- HMRC advises that it will automatically register NRL companies for CT and will issue new Unique Taxpayer Reference (UTR) numbers which will replace those used on forms SA700. Please let your BKL contact know if you have not received a new UTR by 30 June 2020.
- Companies do not need to register with UK Companies House or submit accounts, unless they have a permanent establishment in the UK.
- Any capital gains will be taxed at CT rates through the form CT600, which has been applicable since 6 April 2019. Separate CT returns are therefore required to report any UK property disposals during the year to 5 April 2020.
Other CT considerations
In view of the change to the CT regime, you may also need to consider the following:
- The UK CT rate is 19%, so you will see a small reduction in your UK tax liability.
- Any “income tax” capital allowances pools as at 5 April 2020 will transfer to CT without a balancing allowance or charge arising.
- Any “income tax” property business losses at 5 April 2020 will be carried forward to set against future CT property business or non-trade loan relationship (see below) These must be used in priority to any subsequent losses made under the CT regime.
- Loan relationships are amounts paid or received in relation to money debts arising from the lending of money – typically interest on loans. These are considered separately to property business profits and are taxed at CT rates.
- Brought forward loss claims of a company or group in excess of £5m are restricted to £5m, plus 50% of the profits in excess of £5m. These rules are complex, so please contact us for further information if you think this may affect your company.
- Certain losses will also be available to surrender for group relief to other companies in the same group.
- Should a company or group incur interest and other financing costs in excess of £2m in a year, the Corporate Interest Restriction (CIR) can apply. This will limit the amount that may be set against income in that year. Again, please get in touch with us for guidance and clarity on how your company may be affected by these complex rules.
Our property and tax experts are happy to help you with any queries about the new rules. Please speak to your usual BKL contact or use our enquiry form.
