PIM4703 - Rent from property outside the UK: Corporation Tax (CT)

General

The profits of an overseas property business are chargeable to CT as property income under Part 4 of the Corporation Tax Act 2009 (CTA09). “Overseas property business” is defined in CTA09/S206.

Where the company is in receipt of income from more than one overseas property all those properties jointly constitute a single overseas property business of that company. This is the same approach which applies to the overseas property income of individuals within the charge to IT. However, where there is a claim to tax credit relief where the overseas income has suffered foreign tax please refer to the guidance below.

Losses

Losses of an overseas property business can only be set against future profits from that overseas property business and cannot be set against profits of a UK property business or any other profits of the company under section 66 of the Corporation Tax Act 2010 (CTA10).

Losses of a UK property business can be set against the company’s total profits (including proifts of an overseas property business) - CTA10/S62.

Credit for foreign tax

If the overseas income has suffered foreign tax and a claim to tax credit relief is made, it will be necessary, for the purposes of the source by source rule (see INTM161210) to identify the amount of UK tax attributable to income from each particular property. Where, therefore, tax credit relief is claimed separate computations of profits and losses for each property will be required. For the purposes of calculating tax credit relief, losses should be deducted in the order most favourable to the company’s claim. Normally this will mean that losses should be allocated first against the source which has suffered at the lowest rate of foreign tax.