D4.122C Non-resident companies carrying on a UK property business—transitional rules
Transitional provisions apply in respect of a UK property business being carried on as at 5 April 2020 by a non-UK resident company. The provisions aim to ensure that no income falls out of account or is taxed twice. Equally, they aim to ensure no expense is relieved more than once as a result of the change in regimes from income tax to corporation tax.
The transitional rules are explored in further detail below.
Transitional rules—property rental losses
Under transitional rules, it is possible to carry forward any realised property losses existing at 5 April 2020 from income tax to corporation tax, provided the company continues to carry on the same UK property business.
The losses can be offset against future rental profits, including profits from loan relationships or derivatives which enable the company to generate the property income1. However, the loss is not be available for offset against other types of income or gains arising to the non-UK resident company that are also chargeable to corporation tax. In addition, it is not possible to group relieve the brought forward property losses to other group companies that are chargeable to UK tax. These losses must also be used in priority to any losses made on or after 6 April 2020 under the corporation tax regime2.
The offset against future UK property profits is automatic. Therefore, no claim is needed, but, equally, it is not possible to tailor the amount of losses
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