HM REVENUE AND CUSTOMS has published a consultation document on how it plans to bring ‘non-UK resident companies’ within the scope of the UK’s corporation tax regime.
David Waldron, tax director at PwC in Guernsey, said the move could potentially be significant for local company structures used to hold property in the UK.
‘All non-UK resident companies are affected, but those most affected will be non-resident property holding companies, such as those commonly set up in the Channel Islands, which have significant gearing and which are large and/or loss-making,’ he said.
Currently, non-resident companies are only subject to UK corporation tax on trading income if they are carrying on trade through a permanent establishment in the UK.
Other UK source income, such as rental income, is subject to UK income tax.
The change is being proposed so the new interest deductibility rules and the loss relief rules, applying from 1 April 2017 for those already within the corporation tax regime, can be extended to non-UK resident companies.
‘The government thinks this is the better option as opposed to introducing further and probably more complex legislation to implement the same rules for corporates subject to income tax,’ Mr Waldron said.