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The Taxation of Income from Land (Non-residents) (Amendment) Regulations 2020

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EXPLANATORY NOTE

(This note is not part of the Regulations)

Section 17 of, and Schedule 5 to, the Finance Act 2019 made provision for non-UK resident companies to be chargeable to corporation tax in relation to profits of a UK property business with effect from 6th April 2020. These Regulations make consequential amendments to the Taxation of Income from Land (Non-residents) Regulations 1995 (“the principal Regulations”).

Regulation 3 amends regulation 2 of the principal Regulations to amend the definition of “deductible expense” to permit expenses to be offset and make a consequential amendment in relation to the exclusion of the corporate interest restriction rules in Part 10 of the Taxation (International and Other Provisions) Act 2010 where an election is made under regulation 9(4)(b) of the principal Regulations.

Regulation 4 amends regulation 9 of the principal Regulations and regulation 5 inserts a new regulation 9A into the principal Regulations to make provision for an election to apply a rule in relation to the amount of financing costs that may be taken into account as an expense in calculating the amount to be withheld on account of tax from rental income before it is paid to a non-UK resident subject to corporation tax. The rule restricts the deduction for financing costs to an amount representative of the amount which would be deductible on the application of the corporate interest restriction in Part 10 of the Taxation (International and Other Provisions) Act 2010 to a non-UK resident company.

Regulation 6 makes a transitional provision to disregard any financing costs attributable to any time before 6th April 2020, before non-UK resident companies become chargeable to corporation tax, where an election has been made.

A Tax Information and Impact Note covering this instrument will be published on the website at https://www.gov.uk/government/collections/tax-information-and-impact-notes-tiins.

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