Autumn Budget 2018 – UK property income and non-resident companies

UK non-resident companies that are in receipt of UK property income are subject to income tax. The rate of tax is at the basic rate of 20%. Currently tax returns are submitted only in paper format, through the self-assessment system and the applicable deadline for submission being 31 January following the year of assessment.

With effect from 6 April 2020 these companies will be required to file corporation tax returns under the corporate regime and profits will be subject to corporation tax going forward at the prevailing corporate rates. This will mean that accounts will need to be prepared in the iXBRL format for filing purposes and tagged to the corporation tax return.

Several issues arise from this change. This will mean that accounts will need to be prepared in the iXBRL format for filing purposes and tagged to the corporation tax return. This could prove to be an additional cost for many companies previously used to filing a simple paper return.

In addition, several of the corporation tax rules not applicable to income tax will now apply and will thus potentially lead to loss of deductions for the company. The most likely deduction to suffer will be the interest costs on mortgages and other debt. Within the corporate tax regime, the worldwide debt cap rules may be applicable for companies within large international groups.