ICAEW’s Tax Faculty reports that notices to file income tax returns are being received by non-UK companies with UK rental profits despite such profits being subject to corporation tax since 6 April 2020.
Previously, non-UK companies would have been charged to UK income tax on rental profits generated from UK properties. Despite the change to corporation tax from 6 April 2020, a number of the Tax Faculty’s volunteers have reported that their corporate non-resident landlord clients are receiving notices to file income tax returns (SA700) for the tax year 2020/21.
In at least some of these cases, the companies concerned are under enquiry in respect of earlier years. It is therefore possible that HMRC has kept the income tax accounts open for these companies and so the receipt of a notice to file an SA700 is a consequence of this.
A member of the Tax Faculty has contacted HMRC to clarify the position. HMRC is now investigating this matter and has asked for ICAEW members to compile a list of clients that have received notices to file SA700s, indicating whether, in any of these cases:
- the UK property business commenced on or after 6 April 2018, or
- the company is in receipt of other income sources that remain chargeable to income tax.
ICAEW is concerned that companies receiving such notices will not realise they have an obligation to file a corporation tax return (CT600) and may therefore suffer penalties if they don’t file one.
The faculty recommends that members in practice contact their non-resident landlord clients to find out what notices to file returns they have received for 2020/21 and advise them of their corporation tax return obligations and also actions concerning the notice to file an income tax return to avoid automatic penalties for not filing an income tax return.
The faculty also requests that members inform it of cases that fall inside or outside either of the two circumstances referred to above by emailing firstname.lastname@example.org.
This article will be updated in the event of further developments.
Future of Tax
As HMRC launches its review of the system that underpins the tax system, we take a look at the pressing issues and challenges.
This guidance is created by the Tax Faculty, recognised internationally as a leading authority and source of expertise on taxation. The Faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.