Following an announcement at Autumn Statement 2016, and subsequent consultations, the government moved forward with plans to charge Corporation Tax to non-UK resident companies with property income. Currently, these companies are chargeable to Income Tax and not UK Corporation Tax.
This measure will come into effect from 6 April 2020 when any non-UK resident companies that carries on a UK property business or has any other UK property income will become liable to Corporation Tax rather than Income Tax as at present.
This change is part of the government’s aim to ensure that all companies are subject to the same tax treatment and to limit some of the reliefs claimed by foreign companies on UK rental income. Whilst the Corporation Tax rate is lower, the benefit of the falling tax rate may not offset the tighter restrictions faced by non-resident companies claiming tax relief on rental income.
This measure is expected to affect a significant number of non-resident company landlords. The restriction may also affect entities that seek to reduce their tax bill on UK property through offshore ownership.