Citation, commencement and effect

1. —(1) These Regulations may be cited as the Taxation of Income from Land (Non-residents) (Amendment) Regulations 2020 and come into force on 9th March 2020.

(2) These Regulations have effect in relation to an annual period commencing on or after 1st April 2020.

(3) In these Regulations, “annual period” has the meaning given in regulation 2 of the Taxation of Income from Land (Non-residents) Regulations 1995( 2 ).

Amendment to the Taxation of Income from Land (Non-residents) Regulations 1995

2.The Taxation of Income from Land (Non-residents) Regulations 1995 are amended as follows.

Amendment to regulation 2 (interpretation)

3. In regulation 2, in the definition of “deductible expense”—

(a) after “means” insert “, subject to regulation 9A(6),”, and

(b) at the end insert “or is capable of being offset against those profits under the Tax Acts”.

Amendment to regulation 9 (calculation of payment of tax by agent)

4. In regulation 9—

(a) for paragraph (4), substitute—

“ (4) The expenses specified are all amounts paid in the quarter by the prescribed person or by another person at the direction of the prescribed person that—

(a) the prescribed person is reasonably satisfied are deductible expenses, and

(b) in relation to financing costs, where the prescribed person elects, do not exceed the financing costs allowance. ” , and

(b) after paragraph (9) insert—

“ (10) For the purposes of this regulation, “financing costs” and “the financing costs allowance” have the meanings given in regulation 9A(5). ”

Insertion of new regulation 9A

5. After regulation 9 insert—

“ Election in relation to financing costs

9A. —(1) This regulation applies where an election is made under regulation 9(4)(b).

(2) The election—

(a) must be notified to Her Majesty’s Revenue and Customs with the annual return which relates to the first quarter to which the election applies, and

(b) is irrevocable.

(3) Where in any quarter in an annual period, the financing costs that the prescribed person is reasonably satisfied are deductible expenses exceed the financing costs allowance, the amount of the excess is carried forward and treated as financing costs in the next quarter, including a quarter after the end of that annual period.

(4) Where in any quarter in an annual period, the financing costs allowance exceeds the financing costs that the prescribed person is reasonably satisfied are deductible expenses, the amount of the excess (“the unused allowance”) is carried forward and included in the financing costs allowance in the next quarter, including a quarter after the end of that annual period.

(5) For the purposes of this regulation—

“financing costs” has the meaning given in section 544(4) and (5) of the Corporation Tax Act 2010 ( 3 ) , but in applying subsection (5) the reference to “accounting period” is to be read as a reference to “annual period”;

“the financing cost allowance” for a quarter is the sum of—

“the relevant amount” for a quarter is the greater of—

(6) For the purposes of this regulation and regulation 9, in applying the definition of “deductible expense”, the reference to the Tax Acts is to be treated as not including Part 10 of the Taxation (International and Other Provisions) Act 2010 (corporate interest restriction) ( 4 ) . ”

Transitional provision

6. —(1) Where an election is made under regulation 9(4)(b) of the principal Regulations, inserted by regulation 4(a) of these Regulations, financing costs attributable to any time before 6th April 2020 may be included as a deductible expense but must not be taken into account in determining the extent, if any, to which financing costs exceed the financing costs allowance for any quarter in an annual period.

(2) The amount of financing costs attributable to any time before 6th April 2020 must be determined on a just and reasonable basis.

(3) In this regulation—

“annual period” and “quarter” have the meanings given in regulation 2 of the principal Regulations;

“deductible expense” has the meaning given in regulation 2 of the principal Regulations as amended by regulation 3 of these Regulations;

“financing costs” and “financing costs allowance” have the meanings given in regulation 9A(5) of the principal Regulations, inserted by regulation 5 of these Regulations;

“principal Regulations” means the Taxation of Income from Land (Non-residents) Regulations 1995.