Now that non-resident companies are subject to UK corporation tax on their capital gains, HMRC have published guidance on registering a company for corporation tax where an interest in UK land and buildings has been sold by a non-resident company.
Who should register for corporation tax
A non-resident company or collective investment vehicle which is deemed to be a company (eg unit trust) disposes of a property or shares in a property rich company is subject to UK corporation tax.
Currently non-resident companies are subject to UK income tax on their rental profits and will not generally be within the charge of corporation tax. This position will change in April 2020 when rental profits of a non-resident company move into the corporation tax regime.
HMRC have confirmed that an agent can act on behalf of a client even if they have not already been authorised to do so.
When to register
Registration must be made within 3 months of becoming chargeable to UK corporation tax. This will normally be within 3 months of the date of the disposal of the property or property rich company. Disposals of investment properties by non-residents taking place prior to 6 April 2019 are not generally subject to corporation tax and therefore do not need registration. The exception to this would be the disposal of properties used within a UK permanent establishment, trading assets (such as stock) or deemed trading assets under anti-avoidance rules.
HMRC aim to send a Corporation Tax registration number within 15 days allowing registration for online Corporation Tax services. A tax return can then be submitted electronically.
Unless a company is subject to Corporation Tax on another business, a tax return is prepared for the date of disposal and any other disposal in the year will require separate tax return. Separate return periods can mean a capital loss may not be available for set off against a gain realised earlier in the tax year.
Calculating Corporation Tax liabilities
Corporation tax is calculated on gains realised. The general default position will be use the property value at April 2019 for non-residential property or April 2015 value in place of cost for residential property. Original cost can be used in place of a valuation.
Paying Corporation Tax
Strictly Corporation Tax may be due on the date of the property disposal. However, HMRC have agreed on a concessionary basis that payment will be due 3 months and 14 days after the disposal date.
From 6 April 2020 non-resident companies will be subject to Corporation Tax on their rental business profits. For disposal of directly owned property after 5 April 2020, registration process, tax return submission date and tax due dates may change where it carries on a rental business.
The Corporation Tax regime is more complex than the current income tax regime.