HMRC have updated their guidance to assist non-UK resident companies who have missed the 2023 changes to Corporation Tax and have been applying the wrong rate of tax to their profits.
When Calculating Corporation Tax, non-UK resident companies that do not have a Permanent establishment within the UK are not:
- Eligible to use the Small profits rate (19%, where profits are below £50,000).
- Entitled to marginal relief (where profits are between £50,000 and £250,000).
Corporation Tax must be calculated on all profits using the Main rate (25%).
HMRC have recently updated their guidance to note that a small percentage of non-resident companies have filed Corporation Tax returns incorrectly using the 19% tax rate or applying marginal relief.
Where HMRC identify this error they will correct the affected return and issue a Notice of Correction (CT620), which will detail the additional tax due.
If a company disagrees with a Notice of Correction, they can email
HMRC state that the Corporation Tax online service will be updated in April 2025 to include a new company type for non-resident companies, which will remove this issue. Until then, non-UK resident companies are advised to use company type 2 (labelled as Close investment-holding company) in Box 4 to ensure the correct rate of tax is applied.
Useful guides on this topic
Calculating Corporation Tax & Checklist
How do you calculate Corporation Tax? What is the small profits rate? How do you calculate Marginal Tax relief? How do you adjust for Associated Companies? What is meant by Control? What are Augmented profits?
Associated companies checklist
A checklist to help determine whether companies are associated for Corporation Tax.
Companies: Permanent establishment & residence
What are the rules for determining a company's country of residence? What is central management and control? When does a company create a permanent establishment in another country?
Associated companies & tests for control
What is an associated company? What are the tax effects of associated companies? How do the control tests work?
Calculating Corporation Tax & Checklist
How do you calculate Corporation Tax? What is the small profits rate? How do you calculate Marginal Tax relief? How do you adjust for Associated Companies? What is meant by Control? What are Augmented profits?
External links
HMRC: Changes and issues affecting the Corporation Tax online service
