Bringing non-resident companies within the CT regime

The Government has released proposals to bring the UK real property income of non-resident companies within the charge to corporation tax.


For details of the Government's plans to take forward this consultation, see "Bringing non-resident companies within the CT regime on UK property income and gains".

The Government has published a consultation document, “Non-resident companies chargeable to income tax and non-resident CGT”, setting out its proposals for bringing certain non-resident companies within the charge to corporation tax (CT). Despite uncertainty caused by statements in the Spring 2017 Budget, the consultation document makes clear that the measure is 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.


The 2016 Autumn Statement announced that the Government was considering bringing all non-resident companies receiving taxable income from the UK into the CT regime. Currently, only non-resident companies with a UK permanent establishment (PE) pay UK CT. The Government announced that it would consult on the case and options for implementing this change and that consultation has now been released.


The consultation document makes it clear that the proposals to bring certain non-resident companies within the scope of CT are, in fact, limited to income from UK real property. The consultation considers the case for extending CT treatment to all non-resident companies which are currently subject to income tax but rejects the case as unnecessary. In particular, the majority of the UK’s double tax treaties apply a test based on the presence of a PE in any event, such that extending CT to non-resident companies which trade with (rather than in) the UK would be largely ineffective. In addition, there are no plans to alter the status quo with regard to withholding taxes and deduction of tax at source.

As such, the proposals in the consultation document are limited to non-resident companies receiving income from UK real property. The intention is that the profits of a UK property business of an non-resident company are brought within the scope of CT. The main reason for making this change is to ensure that the computation of UK property business profits for non-resident companies is aligned with those of UK companies. In particular, this will mean applying the interest restriction rules to be introduced in Finance Act 2017 and the restrictions on carry-forward loss relief.

In addition, the Government proposes that both gains by non-residents on the disposal of UK residential property currently chargeable to non-resident capital gains tax (NRCGT) and ATED-related gains should also be brought within the charge to CT under these proposals.

The consultation document highlights a number of issues that will need to be addressed in detail at a later stage, such as determining the first accounting period and the computation rules generally. In particular, there will clearly need to be transitional provisions dealing with the move from income tax to CT treatment for affected companies, including rules for accrued losses. On this point, the Government considers that it would be reasonable for income tax property losses to be grandfathered and carried forward for use against the profits of the UK property business under the CT regime. However, such losses would not be available for surrender or set against other CT profits of the non-resident company.


Ambiguous statements in the Spring Budget 2017 had raised concerns that the policy may have extended to taxing gains on commercial property generally, so affected taxpayers will welcome confirmation that the intention behind these proposals is not to extend the scope of UK tax in relation to UK property beyond the recent developments.

The consultation is open for responses until 09 June 2017. Responses should be sent to No specific timeframe for introduction of the change is set out in the document, though the Government has said that it will publish its response in Autumn 2017.

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.