From April 2020, non-resident corporate landlords will be taxed under corporation tax instead of income tax rules. HMRC is currently contacting those with UK properties to allocate them a corporate tax reference.
While the change is likely to reduce the tax rate from 20% income tax rate to the current 19% corporation tax, the rules on interest and other deductions may change. Under corporation tax, there are also rules around when interest can be deducted on the payment.
Another issue that non-resident landlords miss is the report of capital gains on the sale of UK property or shares in a property company (defined as 75% of the company’s income being derived from property letting). With these transactions, there is a reporting requirement to make a return and pay the tax with 30 days of the sale.
This means it is important that non-resident landlords plan ahead when selling a UK property or shares in a company with UK property.