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Corporate Tax - UK Real Estate

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Corporate Tax - UK Real Estate

As a tax neutral jurisdictions, Jersey and Guernsey are well placed as tax neutral investment platforms for inward investment directly or indirectly to the UK property sector. Whilst over time many tax advantages have been eroded by ever changing tax legislation issued by the UK government, increasingly for non-tax considerations, Jersey and Guernsey maintain their attractiveness to global investors as the preferred property vehicle due to their flexible capital maintenance regimes and abundance of real estate professionals and expertise with the Islands. 

Corporation Tax considerations

We have at a high level summarised some of the tax considerations to be considered by non-UK investment vehicles of UK real estate:

Corporation Tax compliance

Whilst non-UK resident companies are subject to UK Corporation Tax on their UK property business profits only at the current Corporation Tax rate of 25% (from 1 April 2023) as they are unable to benefit from the small profits or marginal rate. 

Non-UK investment vehicles in receipt of UK property income have ongoing compliance obligations to submit a Corporation Tax return (alongside iXBRL tagged financial statements) to HM Revenue and Customs (“HMRC”) within 12 months of the accounting period end date. 

Payment of Tax 

HMRC charge late payment interest on tax which is not paid on time. To minimise the impact of these interest charges, it is essential to remain aware of the relevant payment date for UK Corporation Tax. 

The relevant payment date for a Companies UK Corporation Tax liability will be dependent on the Companies level of taxable profits. Broadly, for standalone Companies with no associated companies, where taxable profits for an accounting period are less than £1.5million, the Corporation Tax liability is due for payment within 9 months and one day of the accounting period end. Where profits exceed £1.5million, the Company will be required to make quarterly instalment payments to HMRC under either the large or very large payments regime. A Company is considered to be large (taxable profits between £1.5million and £20million) or very large (taxable profits exceeding £20million).

Additional considerations are required where the Company is part of a group or has associated Companies through ownership (for accounting periods beginning on or after 1 April 2023)., the above thresholds are split between all associated companies. It is therefore vital to ensure both the tax compliance and payment obligations are reviewed on an ongoing basis to minimise the impact of late payment interest charged by HMRC. 

Corporate Interest Restriction

Other considerations apply to both non-UK and UK companies and groups investing into UK real estate, including the UK Corporate Interest Restriction legislation adopted with effect from 1 April 2017, as part of the initial series of OECD BEPS measures designed to prevent the shifting of profits from the UK to low tax territories using connected party financing arrangements, which may restrict groups with net interest expenses of greater than £2million.

Capital gains

From 1 April 2019, the direct or indirect disposal of both UK commercial or UK residential by a non UK resident company may be subject to Corporation Tax. Any disposal must be reported to HMRC and consideration of whether a taxable gain arises on disposal should be considered.

Alternatively, it may therefore be beneficial for UK property rich offshore collective investment vehicles to consider whether the transparency or exemption elections available to qualifying collective investment (“CIV”) schemes.

Detailed advice and modelling should be undertaken as dependent on both the corporate structure utilised and the tax status of investors, there is no one size fits all approach in determining the most favourable outcome for investors in the acquisition, holding and exit of UK real estate assets.

"During my engagement with Baker Tilly Channel Islands I have found them to be thoroughly professional in their dealings with technical approach. In particular, I have been impressed with the partner-led approach with is focussed on quality client service, building relationships and openness which has led to excellent communications and therefore no surprises."

AIM Listed Real Estate Fund and Global Natural Resources Group


Non-UK companies can only register for VAT if they are making or are intending to make UK taxable supplies. The VAT treatment for UK property activities can be complex as taxable supplies relating to properties can have various VAT rates. For example:

  • Commercial letting is an exempt supply but there is the option to tax at the standard rate of 20% VAT 
  • Residential lettings are exempt from VAT and there is no option to tax available; and
  • Sale of new residential buildings,  Construction and sale of student accommodation or nursing homes are zero-rated supplies provided certain conditions are met.

It is therefore important that where UK property is involved, that non-UK resident companies consider their VAT position and ensure compliance on an ongoing basis.

UK residential property matters

Non-resident companies owning UK residential properties valued at over £500,000 as at 1 April 2022 or at acquisition (if later than 1 April 2022), are required to submit an annual ATED return by 30 April each year and pay the relevant annual charge subject to any reliefs including but not limited to commercial rental to a unconnected third party or development for resale by a property developer. 

How can we assist

We can offer a full suite of tax services for offshore vehicles investing in commercial and residential UK real estate including:

  • UK Corporation Tax compliance including advising on Quarterly Installment Payments for large and very large companies/groups including iXBRL tagging of financial statements
  • Financial reporting considerations in respect of property holding structures
  • Corporate Interest Restriction considerations
  • Transparency and exemption elections and ongoing compliance
  • Tax reporting and modelling on disposal of UK real estate assets
  • VAT services including: 
    • Quarterly or Monthly VAT returns 
    • Option to Tax notification
  • Construction Industry Scheme filings
  • Annual Tax on Enveloped Dwellings (“ATED”) returns (including appropriate relief claims) for Companies owning high value residential properties. 
  • Jersey and Guernsey tax services
    • Company tax returns
    • Economic substance advisory for more complex group arrangements
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