Liability of non-resident companies

Source: HM Revenue & Customs | | 05/06/2018

Under the current rules non-resident companies with a trading business in the UK are liable to pay UK Corporation Tax on their profits made through a permanent establishment/branch or agency.

There are some differences in the taxation of non-resident companies as opposed to resident companies. For example, a non-resident company:

  • is not liable to account for ACT on distributions made before to 6 April 1999
  • cannot have 'franked investment income'
  • cannot have surplus franked investment income for the purposes of ICTA88/S242
  • cannot set trading losses against dividend income to augment its trading income for the purposes of absorbing losses brought forward

Any UK-source income received by a non-resident company which does not carry on a trade in the UK through a permanent establishment/branch or agency is subject to UK Income Tax on any UK-source income. Any Income Tax due is calculated at the basic rate only without any allowances, subject to any applicable Double Taxation Agreement.

A consultation was published by the government last year to explore whether non-UK resident companies that carry on a UK property business or have other UK property income should be charged to Corporation Tax, rather than being charged to Income Tax as at present.

In a wide-ranging response to the consultation, the government concluded that these non-UK resident companies should become subject to corporation tax in order to help ensure that non-UK resident companies and UK resident companies face the same tax rules and rates on similar types of income.

This change means that corporate landlords will ultimately become subject to Corporation Tax on their income and gains. The changes have not yet been legislated for but are expected to come into effect from 6 April 2020 with legislation to be published in Finance Bill 2018/19 later this year.



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