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Technical notes

NON RESIDENT LANDLORD

• Withholding tax scheme


• Individuals may get personal allowances


• Persons not-ordinarily resident may get interest paid tax free

An individual, trust, or company that is not resident in the UK is generally taxable on income arising in the UK.

Accounting Rules

The rules for the preparation of accounts for a lettings business are the same for all taxpayers, whether resident or non-resident and whether an individual, a group of individuals a trust, or a company.

Non-resident individuals

Returns are made on the normal tax return form (SA100) and the property pages (SA105) and in addition the Non-Residence pages (SA109). Some non-residents are entitled to a “personal allowance” This an amount of taxable income you may receive before any tax is due.

Non-resident company landlords

Income tax is paid by non-resident company landlords and details of the profit on lettings are returned on form SA700. Note – a non-resident company can claim the 10% Wear and Tear Allowance. The rate of tax for a non-resident company is the same as the basic rate for individuals. See Rates and Allowances.

Interest – form R105

Individuals who are not ordinarily resident may register with their building society, bank or other deposit taker to receive interest without the deduction of tax by completing form R105

Leaving the UK – form P85

This form is for use if you have left or are about to leave the UK. It helps HM Revenue and Customs decide how you should be treated for UK tax purposes after you leave. It also serves to claim a repayment of tax in the year you leave. (See Leaving the UK).

Non-resident landlords scheme

To prevent non-resident landlords avoiding their UK taxation obligations arising from the profit on a property rental business, a “withholding tax” scheme exists. Lettings agents are obliged to deduct from net rents an amount of tax and send it quarterly to HM Revenue and Customs. The amount on which the tax calculation is made is normally the gross rent less the agent’s fees and any other allowable expenses such as maintenance. The rate of tax is the basic rate. (See Rates and Allowances). Where there is no letting agent, the tenant is obliged to operate the scheme unless the passing rent is below £100 per week.

An application may be made to HM Revenue and Customs for the rent to be paid without deduction of tax. This will be granted as long as the non-resident taxpayers taxation affairs are up to date and maintained up to date. If they fall into arrears the permission to receive rent gross will be withdrawn. If granted, this permission does not mean that the income is not subject to tax. The form to be used for the application is one of the “NRL” series:-

• NRL1
  Application by a non-resident individual to receive UK rental income gross.
• NRL2
  Application by a non-resident company to receive UK rental income gross.
• NRL3
  Application by non-resident trustees to receive UK rental income gross.
• NRL4
  Complete this form to register with the HM Revenue and Customs if you are a letting agent who receives rental income for non-resident landlords.
• NRL6
  Complete this certificate (or one like it) if you are a letting agent or tenant who has deducted tax from the rental income of a non-resident landlord.

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© Landlords Tax Services Ltd 2008 All Rights Reserved - In an article such as the one on this page we can only give brief general guidance and cannot cover all situations. This guidance may not cover all your personal circumstances and so you should not rely on it. Before taking action or not, always do your own specific research and seek appropriate professional advice which takes into account your personal circumstances, with the full facts of the case and all documents to hand. Neither Maurice Patry F.C.A. nor Landlords Tax Services Ltd can be held responsible for the consequences of any action or the consequences of deciding not to act.