Non-Resident Corporate Landlord

Offshore Companies having  property(s) in the UK and receiving rental  income will  be taxed under corporation tax rule from  6 April 2020.

From 6 April 2020, non-resident companies with income from UK  property will no longer be taxed under income tax rules  but will be  subject to corporation tax. The realignment is to equalise the tax  treatment of resident and non-resident companies receiving UK property income.

Interest Relief

While the corporate tax rate is 17% compared to  20% income tax rate  it also brings non-resident companies into a complex corporation tax  regime. The treatment of finance costs  will fall under  the loan  relationship rule for corporate tax debt. Heavily geared company with  large shareholders loan may see  the  interest deduction  capped  under  the thin capitalisation rules  as well having to comply with  transfer pricing rules.

Loss Relief

Under income tax rules as long as the expense is incurred wholly and  exclusively  for  property business   a deduction is available.  Losses  can  carried forward and relieve against future rental profit.

Under the corporate tax rule a large company with loss of £5,000,000  will  have restriction imposed on offsetting  carried forward  loss,  capped at 50%  for  relief.

In a group situation losses can be surrendered/  offset against  the  profit of  UK members of the corporate group. However  restrictions  will  apply if the loss has been utilised in the local territory.