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Switch to corporation tax puts pressure on tax agents

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Tax agents will be in the firing line from April 2020 when non-resident corporate landlords must switch from paying income tax on UK profits to paying UK corporation tax.

21st Feb 2020
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Rebecca Cave talks to Rob Durrant-Walker, the business tax technical director at Garbutt & Elliott, about why this change is happening in April 2020 and what tax agents need to do for their clients.

Why is so much UK property held by non-resident companies?

HMRC estimate there are around 22,000 non-resident corporate landlords (NRCL), which vary from companies holding a single residential property, to those holding large portfolios of commercial property.

There are historical tax reasons why UK property may be held by a company which is not registered in the UK. For example, before April 2017 a UK non-domicile individual would want to hold their UK property in an offshore company (and often an excluded property trust), to keep it out of the IHT net. From April 2017, the scope of IHT was extended to catch the shares of the offshore property-owning company, but the structures remain in place.

Holding commercial property in offshore entities has long been a way of removing any gains made on the properties in the future from the UK tax net. The buildings would often be leased back to the organisations that occupied them. This was how the offices used by the Inland Revenue embarrassingly came to be owned by a company based in Bermuda in 2002.

The tax advantages of such offshore structures were removed from April 2019 as all gains arising from UK properties are now taxed in the UK, irrespective of where the holding company is resident.

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Replies (4)

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By SteveHa
22nd Feb 2020 11:46

Quote:
The company must inform HMRC in writing if it wants to draw up accounts to a different date. It should also tell HMRC if it already has a CT UTR number.

This bothers me, since this explicitly means that the taxpayer must manage HMRC systems, and this is the thin end of a very large wedge. If such requirements are introduced in the wider sphere, it will make HMRC largely redundant other than collecting (rather than assessing) tax and enforcing penalties.

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Replying to SteveHa:
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By flightdeck
24th Feb 2020 11:34

Sorry, I am not understanding you, why does it it bother you?

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By pauljohnston
24th Feb 2020 10:59

I understand why this has been done and dont anticipate much increase in the work done by the tax agent.

Regarding Stel.acca cmment - this appears to be the way the that HMRC is going. Look at the NIC2 farce

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By mishapen
24th Feb 2020 11:03

Hi Rebecca

For a NRCL that is already registered under the NRL scheme, do you think it will have to re-register under the Corporation Tax regime in order to maintain gross payment status?

Thanks

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