In many ways the move to CT represents a significant change, which goes far beyond the reduction in the tax rate to 19% for CT, compared to the 20% previously charged for income tax.
In the 2021 Spring Budget, the Chancellor, Rishi Sunak, announced that the main rate of corporation tax will increase to 25% from 1 April 2023. This increase will affect companies with profits above £250,000 and those with profits between £50,000 and £250,000 will suffer a marginal tax rate of 26.5%, taking them from the small companies’ rate of 19% up to the new main rate.
Less widely advertised is that all close investment-holding companies (CICs), broadly a company is close if controlled by five or fewer participators, will be subject to the main rate, regardless of their profit level. A close company investing in land will not be a CIC, provided it lets the property commercially, or intends to do so.
In our experience, it’s likely that many non-resident landlord companies will be affected by this increased rate, even where profits are below £50,000 a year. Typically, this could be because they hold a property occupied by a member of the owner’s family, or by a beneficiary of a trust that owns the company, and any rent charged is not fully commercial.