13 July 2016

Corporation tax change for non-resident developers and traders

The tax landscape changed dramatically on 5 July when profits from trading and developing UK land became chargeable to UK tax even if the trader/ developer is not UK resident and does not have a permanent establishment in the UK.

Historically the UK corporation tax system charged non resident companies to corporation tax only in respect of profits from a trade carried on though a permanent establishment in the UK and then only on the profits attributable to that permanent establishment. The legislative changes are designed to ensure that non-resident developers of and traders in UK land will be fully taxable on profits from dealing in or developing land in the UK.  

Often traders structured their ownership through Guernsey, the Isle of Man and Jersey so as to rely upon the relevant double taxation agreement (DTA) to argue that their business operations in the UK were  protected from UK tax by virtue of the relevant DTA. However protocols have been agreed which amend these DTAs so these arguments will no longer be effective.

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