A short article by Jon Hanifan and Sutharman Kanagarajah.
In a previous flyer, we discussed UK law now requiring non-UK entities that buy, sell, or otherwise transfer UK land/property to:
- register with Companies House;
- identify registrable beneficial owners or managing officers; and
- update their record annually, even if ownership has not changed.
In addition to these requirements, HMRC has informed professional tax bodies that it intends to focus on whether longer-standing UK tax obligations are being met.
What is HMRC to do?
HMRC planned to launch, in September 2022, a campaign addressing what it views as non-compliance by overseas corporates owning UK property.
HMRC states this action is driven by data review exercises, including Land Registry data.
What might the campaign entail?
HMRC may issue one of two letters to taxpayers it considers in scope, each accompanied by a certificate of tax position.
The two letter types are expected to cover:
- non-UK resident companies owning UK property that may need to disclose non-resident corporate landlord income, ATED liabilities, and potential Transfer of Assets Abroad (ToAA) liabilities where relevant UK-resident individuals have an interest in the overseas landlord income; or
- non-UK resident companies that may have disposed of UK residential property between 2015/16 and 2018/19 without filing non-resident capital gains returns, may need to apportion gains to participators, and may have rental-income or ATED liabilities.
What is a certificate of tax position?
In essence, it is a form HMRC asks recipients to complete and return, whether or not additional liabilities are identified.
A taxpayer may use it either to disclose underpaid UK tax or to confirm their affairs are compliant and up to date.
HMRC considers the certificate process useful for reducing no-response follow-up cases.
How we can help
Our tax team, with both corporate and personal tax expertise, can help you understand:
- UK tax consequences for non-UK companies owning UK property; and
- how to respond to HMRC's letter, including whether a response is required at all.
Although letters are expected to be addressed to the overseas property-owning corporate, HMRC is also expected to recommend that connected UK-resident individuals review personal tax compliance under related anti-avoidance provisions.
HMRC has historically allowed around 30 days for responses. However, a certificate should not be returned without professional advice. In some cases, no legal obligation to return the certificate exists, though this must be weighed against the practical goal of stopping follow-up correspondence.
HMRC has previously accepted a letter in lieu of the formal certificate, and this may be more appropriate depending on facts.
We would be pleased to discuss the above with you.
If you have queries regarding this article, please contact Centralis or Wheelhouse Advisors.