International rental income within a company

Is a company required to segregate income and expenses by country/region

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A UK company owns residential rental property (not FHL) in a variety of countries around the world - within the UK, europe and other continents.  In some countries the management charges are significantly greater than others, as are the costs for repairs and other services. 

Are all of the rental income streams and expenses simply pooled for the purposes of preparing the company accounts and CT600, or is each country/region segregated, with losses only being able to be carried forward and claimed in the future against income from the same country/region?

Aside from the tax implications generally, this issue may also determine to what extent the company borrows to purchase certain properties - for example, if this is the case, and letting agent fees are high in the US, they may not wish to borrow on the US property as any net losses from that property wouldn't be available to set against net property income from the UK, and so on.

Any thoughts?  

Replies (4)

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By Portia Nina Levin
16th Jan 2017 10:53

The company has a UK property business and on overseas property business. The loss of each of those businesses can be set against the company's total profits for the year, with any excess being carried forward to the following year and treated as a loss arising in the relevant business for that year.

There may also be management expenses (which do not get allocated to either the UK or overseas property business), which can be similarly treated.

Those are the UK "rules".

However, you will need to be able to calculate the profit/loss for each country for double tax relief purposes. There is a very good chance that some of it is not taxable in the UK, and if the profits are not taxable, the losses are not allowable.

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By johngroganjga
16th Jan 2017 11:29

For accounts disclosure purposes you can certainly pool everything, except that your company may be subject to a requirement to disclose a geographical analysis of turnover.

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By ianthetaxman
16th Jan 2017 11:48

Thanks for the replies - it seems that there is no restriction to the inclusion of global rental income and expenses, but there may be CT considerations that would require a country by country split to be made to determine whether income was taxable in the UK or not, and if so, whether there may be a corresponding overseas tax credit available for set off against UK CT.

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Replying to ianthetaxman:
By johngroganjga
16th Jan 2017 14:55

ianthetaxman wrote:

- it seems that there is no restriction to the inclusion of global rental income and expenses

Provided that you are satisfied that the company is not under any obligation to disclose a geographical analysis of its turnover. Just to be clear, if it was under such an obligation it would disclose global turnover as one figure in the income statement but provide the breakdown in a note.

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