In recent years there have been a number of changes to the taxation of non-resident companies. These include the introduction of the Annual Tax on Enveloped Dwellings (ATED) in 2013, the introduction of non-resident capital gains tax (NRCGT) on the disposal of UK residential property interests by certain non-residents, and bringing into the corporation tax (CT) regime non-resident companies which carry on a trade of dealing in or developing UK land. As well as changes for non-resident companies, there are significant changes on the horizon for the wider CT regime, including legislation to limit the deductibility of interest expense, reform of the CT losses regime, and the lowering of the CT rate to 17 percent from 1 April 2020. Against this backdrop of changes, the Government are consulting on proposals to move certain non-resident companies from the income tax regime into the CT regime, to ensure parity of treatment between resident and non-resident companies in areas such as interest deductibility.
The proposal, as set out in the consultation document, would bring certain companies with UK source taxable income from real property within the CT regime, the Government’s reasoning being that to introduce interest restriction and loss reform for non-resident companies by amending the income tax rules would involve significant changes. The following potential issues have been identified in the consultation document:
The Government’s plans do not currently include bringing income arising from a trade carried on in the UK otherwise than through a permanent establishment into the CT regime, as this is understood to only apply to a small number of non-resident companies, and bringing this income into the regime would cause much uncertainty for little practical benefit – however, the Government has stated that it will keep this area under review.
The Government also plans to bring NRCGT gains into the CT regime, with the existing computational rules remaining largely the same, but the consultation does not include plans to bring other gains into the CT regime. The consultation also indicates there are no plans to change the current practice in respect of deduction of income tax on interest and other payments.
The consultation is silent on whether or not there will be a requirement for iXBRL tagging of accounts.
The consultation is open for comment until 9 June 2017.
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