On 17 February 2020, HMRC published a tax information and impact note regarding the upcoming changes to the regulations for the Non-Resident Landlords Scheme (NRLS). The regulations have been made to accommodate the corporate interest deductibility restriction rules (CIR) within the NRLS.
From 6 April 2020, non-UK resident companies receiving UK property income will incur UK corporation tax, but the NRLS will still apply. Under the current NRLS, when calculating amounts to be withheld, many agents are unable to deduct financing costs as they cannot be "reasonably satisfied" that the non-resident can deduct under the CIR due to its complexity and the agent’s lack of knowledge about the non-resident’s affairs.
The regulations alleviate this difficulty by allowing agents to make an irrevocable election to HMRC. The new regulations allow an agent who is collecting rent for a non-resident corporate landlord to make an assumption about the allowance that may be available under the CIR, which applies to corporate taxpayers.
The regulations apply for the NRLS annual period starting on or after 1 April 2020.
The policy paper can be viewed here.