Tax Changes For Foreign Companies Owning UK Property

Expats who own property in the UK will pay corporation tax on their profits for the first time from April, according to new guidance from HM Revenue & Customs.

The new rules will apply to non-resident companies from April 6, 2020.

By June 30, HMRC will automatically issue corporation tax references and a call to file a tax return unless the company has already paid tax through the non-resident landlord scheme and has no chargeable gains for the year.

The measures also apply to mutual funds, investment trusts, exchange traded funds (ETFs) and real estate investment trusts (REITS) based outside the UK.

Change only weeks away

Some transitional rules will apply, explains HMRC in the guidance.

If a company’s only income is from UK property after April 6, 2020, no income tax payment on account is expected for 2020-21 and any credit balances will be repaid.

Foreign companies that have had tax deducted under the non-resident landlord scheme are not expected to file a tax return.

Other exemptions cover non-resident companies starting a property business after April 6, 2020, and tax filings already required through self-assessment..

The rules still allow for non-resident companies paying the annual tax on enveloped dwellings (ATED) if the property owned is for residential use.

100,000 UK homes owned by foreign companies

Corporation tax filings will align with company accounting periods.

The rules do not apply to expats or non-resident foreign nationals owning and renting out property in the UK who have tax deducted from rents under the non-resident landlord scheme or who file an annual self-assessment tax return to account for their rental profits or capital gains.

The tax reporting rules already in place remain the same for these taxpayers.

Data from the UK Land Registry revealed foreign companies owned 97,000 homes in England and Wales in January 2018 – with 23,000 properties belonging to 11,700 companies registered on the tiny British Virgin Islands.

The same research showed 44% of homes owned by foreign companies were in London – while 10% (11,500) were in the City of Westminster and 6,000 in the borough of Kensington and Chelsea.

More information

Full HMRC guidance on non-UK companies paying corporation tax

Company tax returns explained

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