CORPORATION TAX Re: BUDGET 2021

[Pradip]

Are you aware that any landlord that has 1 or more properties in a company, (investment company) regardless of the profit level, will have to pay corporation tax @25% from 2023.

The new limits and 19% rate only apply to TRADING COMPANIES and not INVESTMENT COMPANIES.

Is this a way of getting back at all the landlords who decided to put their properties into a company to avoid the loan interest restriction.

Who is campaigning on our behalf to prevent this unfairness against us landlords ?

[Neelix]

Hum, I think that the UK plc bank account is empty and we all have to contribute more ...

[Gordon999]

Corporation tax is set to rise to 25% in April 2023, up from the current rate of 19%.

Rishi Sunak announced in the Budget that companies with profits of £50,000 or less would remain at the current rate of 19%.

There would then be a taper for firms earning above £50,000, with only firms earning £250,000 or above paying the full 25% rate.

[jpkeates]

The new limits and 19% rate only apply to TRADING COMPANIES and not INVESTMENT COMPANIES.

That would be unfortunate.
It wasn't included in any of the government documents I have read about the budget, where does this information come from?

[Pradip]

Hi jpkeates

see link

https://www.gov.uk/government/public...m-1-april-2023

Under proposed revision

In line with the approach taken with the former rules, the small profits rate will not apply to close investment-holding companies. The definition of a close investment-holding company will follow the definition previously found at section 34 CTA 2010.

I hope this helps

[jpkeates]

I hope this helps

Yes, that's exactly what I was hoping not to see!

I don't think anyone else has noticed that!

Incorporating doesn't have many advantages for a basic rate tax payer who would be the people immediately paying more tax as a company than an individual, but that is definitely very sneaky.

[Gordon999]

Most BTL companies are rented to the public and not to a relative of one's spouse and therefore are not "close investment companies".

So if the company's profit is below £50K, it will continue to be taxed at 19%.

[jpkeates]

Most BTL companies are rented to the public and not to a relative of one's spouse and therefore are not "close investment companies".

I'm somewhat new to this area of taxation, but it looks to me as if renting to a relative would preclude a company letting property from being a Close Investment Company, not causing it to be one.

Part of my problem is that the definition is in a section of the legislation that has now been repealed!
https://www.legislation.gov.uk/ukpga...ion/34/enacted

[jpkeates]

I'm increasingly bothered by this.
I'm certain that the OP must be wrong, if only because this is the only reference to this that I've seen and there's obviously been a lot written about the possible effects on landlords.

But the more reading I do, I can't see why it's wrong.
I feel that I'm obviously missing something...

[Gordon999]

Close investment company mean "close related" investment company ie. let to relatives at below market rent.

Most BTL companies are letting to the public at market rate so are not "close investment companies". Therefore if the annual profit is below £50K , the company pays tax at 19%. This is my understanding.

[jpkeates]

Under proposed revision

In line with the approach taken with the former rules, the small profits rate will not apply to close investment-holding companies. The definition of a close investment-holding company will follow the definition previously found at section 34 CTA 2010.

I hope this helps

I was (obviously) missing something.
A nice wander through the Tax Manuals has brought enlightenment.

I can't imagine many BTL limited companies would meet the definition of a Close Investment Holding company and therefore are not affected by this restriction.

Anyone who's set up a Limited company to let to family might be impacted.