Administration, payment and filing obligations

Non-resident companies receiving UK rental income have moved into the corporation tax regime from the existing income tax regime from 6 April 2020. The tax changes for non-resident companies holding UK property is significant, with changes to almost every aspect of how tax is calculated, paid and reported to HMRC. Non-resident landlords should seek advice sooner rather than later.

Below we set out the compliance arrangements which are affected as a result of these changes.

Registration

Non-resident landlords already registered prior to 6 April 2020 under non-resident landlord scheme (NRLs) with HMRC should have already been issued with a new corporation tax unique tax reference (UTR). An application should be made to HMRC if they have not received one yet or where a new UK rental business has commenced after that date. An application should be made within three months of the date the company becomes chargeable to corporation tax.

Refile tax agents

Non-residents will need to re-file details of their tax agents if those agents are to continue acting on behalf of corporation tax as there is no automatic carry-over of income tax authorization.

Timings

For those companies previously undertaking a UK rental business under the income tax regime, the change will take place at the end of the 2019-20 tax year, with their property business (which is subject to corporation tax) deemed to cease on 5 April 2020, and a new business (subject to corporation tax) and tax period beginning on 6 April 2020. For companies that do not prepare accounts in line with the tax year, a time apportionment of income and expenses will be needed for accounting periods that straddle the commencement date. Profits or losses arising in the period to 5 April 2020 will be subject to income tax rules, with any income arising from 6 April 2020 being subject to corporation tax.

Final self-assessment return to 5 April 2020

Taxpayers will need to complete a final self-assessment return in the normal way to report the proportion of income arising up to 5 April 2020 and the filing deadline will be 31 January 2021.

Subsequent returns post 6 April 2020

A corporation tax return will need to be filed for period commencing 6 April 2020 and for subsequent accounting periods. The filing deadline will generally be 1 year after the date the accounts are made up to.

Tax payment dates

Under the income tax regime, tax was due in three instalments. Due to the Coronavirus pandemic, the 31 July 2020 has been deferred to 31 January 2021.

The tax payment dates for corporation tax also differ from those with which non-resident companies will be familiar. The due date for companies and groups with taxable profits up to £1.5 million (proportionality reduced for the number of companies where the ultimate shareholder has a greater than 51 per cent stake) falls nine months and one day after the end of their accounting period. Apart from the first year under corporation tax, those with higher profits will need to pay their tax in quarterly instalments (“QIPS”), which can mean corporation tax payments may need to be made prior to income tax payments. Where there is more than one company in a group, and certain conditions are satisfied, it may be possible to enter into a Group Payment Arrangements which can reduce the administration associated with making many individual payments.

For further information please contact Adrian Benosiglio or a member of our specialist real estate team.