Bringing non-resident companies within the CT regime on UK property income and gains

The Government has confirmed that it plans to bring non-resident companies within the scope of corporation tax on their UK property related income and gains with effect from April 2020.


For details of the Government's plans to extend UK taxation of real estate held by non-residents, see "Changes to the taxation of real estate held by non-residents".

The Government has issued a consultation response document setting out its plans to bring non-resident companies within the charge to corporation tax on their income and gains from UK property. The Government has announced that it has decided to take forward the proposals as originally envisaged, with a view to introducing the change with effect from April 2020.

Following the Government’s announcement that it intends to bring non-residents’ income and gains from UK commercial property within the scope of UK tax, this reform will affect a larger number of companies than originally envisaged. Non-resident companies with UK property should now be considering how they may be affected by the move to corporation tax and, in particular, whether the application of rules such as the corporate interest restriction rules will affect their returns.


The 2016 Autumn Statement announced that the Government was considering bringing all non-resident companies receiving taxable income from the UK into the corporation tax (CT) regime. Currently, only non-resident companies with a UK permanent establishment (PE) pay UK CT. In March 2016, the Government published a consultation document, “Non-resident companies chargeable to income tax and non-resident CGT”, setting out its proposals. The consultation document made clear that the measure was aimed at bringing UK property income within the CT net and applying recently introduced restrictions on carry-forward losses and interest deductions to that income, rather than extending UK taxation to gains on commercial property held by non-residents. For information on the original consultation, see “Bringing non-resident companies within the CT regime"

In the November 2017 Budget, the Government announced that it would also extend UK tax to gains arising on disposals of UK commercial property by non-residents with effect from April 2019. See “All commercial real estate gains to be taxed”.

Consultation response

The original consultation made it clear that the Government had already decided to make the proposed reforms as the means of applying the corporate interest restriction, loan relationship, corporate loss and other CT rules to non-resident companies. The consultation, therefore, focused its questions on the method for doing so.

Unsurprisingly, the Government has rejected any alternative means for introducing the proposed reforms, concluding (unsurprisingly) that any other form of mirroring the CT rules within the existing income tax regime for non-resident companies would be far more complex than simply bringing non-resident companies within the scope of CT. The Government will also align the rules for notification of liability and payment of CT, requiring affected non-resident companies to register for CT self-assessment.

The new rules will apply to all non-resident companies irrespective of their size.

Most respondents were concerned as to the administrative burden that the change will introduce for affected non-resident companies. There will be considerable complexity both in dealing with the transition to the CT regime and in applying a range of new provisions. On this point, at least, the Government appears to have listened to the concerns. Firstly, the rules will not be introduced until April 2020, allowing a longer period than expected for non-resident companies to adapt to the new regime. Secondly, the Government will consider suggestions and recommendations put forward as to the details of the transitional arrangements. There will be a technical consultation in due course on the necessary transitional provisions to help manage the change from income tax to CT. However, as made clear in the original consultation, any income tax losses brought forward will not need to be recalculated for CT purposes and only residual property profits (after deduction of carried forward income tax losses) will be subject to the 50% loss restriction rules.

Timetable for reform

The Government plans to publish draft legislation and explanatory notes in summer 2018 as part of a technical consultation. Legislation will then be included in the Finance Bill 2018/19. The reform will come into effect from April 2020.


The move from the income tax to the corporation tax regime will create administrative and structural issues for many non-resident investors in UK property. This is particularly the case now that the Government has announced that UK tax is to be extended to gains on UK commercial property, effectively extending the scope of the reform.

The Government has at least pushed back the proposed start date to April 2020.  In the meantime, non-resident investors in UK property should consider their existing ownership structures with a view to determining how they will be affected by the various UK CT rules, such as the interest restriction and loan relationship rules.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.