If you have rental property in the UK but your usual home is outside the UK, your tenants or the letting agents you use will need to operate the Non-resident Landlord (NRL) Scheme. They need to deduct basic rate tax from rental income before they pass it onto you. You can set this tax off against your own tax bill at the end of the year.
On this page:
The Non-Resident Landlords (NRL) Scheme is a scheme for taxing the UK rental income of non-resident landlords.
The scheme requires UK letting agents to deduct basic rate tax from any rent they collect for non-resident landlords. If non-resident landlords don't have UK letting agents acting for them, and the rent is more than £100 a week, their tenants must deduct the tax. When working out the amount to tax the letting agent/tenant can take off deductible expenses.
Letting agents and/or tenants don't have to deduct tax if HM Revenue & Customs (HMRC) tells them not to HMRC will tell an agent/tenant not to deduct tax if non-resident landlords have successfully applied for approval to receive rents with no tax deducted. But even though the rent may be paid with no tax deducted, it remains liable to UK tax. So non-resident landlords must include it in any tax return HMRC sends them.
Non-resident landlords who are eligible can apply at any time for approval to receive their UK rental income with no tax deducted. This includes applying before they have left the UK or before the letting has started.
Applications should be made by:
Completed NRL applications should be sent to:
HM Revenue & Customs
Non-resident landlords Scheme
Room 230
St John's House
Merton Road
Liverpool
L75 1BB
For individuals whose tax affairs are dealt with Public Departments
1 office the NRL1 should be sent to:
HM Revenue & Customs
Public Departments 1
Ty Glas Road
Llanishen
Cardiff
CF14 5XZ
HMRC may refuse approval if it is not satisfied that:
HMRC may withdraw approval if:
HMRC will tell an agent/tenant not to deduct tax if the non-resident landlord has successfully applied for approval to receive rents with no tax deducted. But rent paid with no tax deducted remains liable to UK tax. So non-resident landlords must include it in any tax return HMRC sends them.
All non-resident landlords who receive rents with no tax deducted will have an HMRC office that deals with their tax.
Some individuals who are not resident in the UK are not sent an annual tax return automatically, even though they have UK rental income. This is because many non-residents will have sufficient UK personal allowances to cover any liability.
A letting agent is a person who:
An excluded person is someone whose activity on behalf of a non-resident landlord is confined to providing legal advice/services. However, solicitors who draw up a lease and collect the rent for the first period are not excluded persons.
HMRC has produced a booklet called Non-Resident Landlords - guidance notes for letting agents and tenants that tells people what their responsibilities are under the scheme. In addition, there is a brief Letting agent's guide to the NRL Scheme which outlines the main features of the scheme.
Tenants of non-resident landlords have to operate the scheme if:
and either:
HMRC may sometimes instruct tenants to operate the scheme even where the rent paid is less than £100 a week.
HMRC has produced a booklet called Non-Resident Landlords-guidance notes for letting agents and tenants that tells people what their responsibilities are under the scheme.
The NRL Scheme applies to members of HM Armed Forces and other Crown Servants - for example, diplomats - if they have a 'usual place of abode' outside the UK. They are treated no differently from any other non-resident landlords, even though their employment duties overseas are treated as performed in the UK for the purpose of charging their salaries to tax. So if their absence from the UK is for more than six months, they are within the scheme.
The NRL Scheme is administered by HMRC PT International. Tax is collected by HMRC Banking.
HMRC has produced a booklet called Non-Resident Landlords - guidance notes for letting agents and tenants. This tells people what their responsibilities under the scheme are. In addition, there is a brief letting agent's guide to the NRL Scheme which outlines the main features of the scheme.
Non-resident landlords are persons (this term includes individuals, companies and trustees) who have:
Non-resident landlords can apply to receive their rent with no tax deducted on the basis that either:
When approval has been given, HMRC sends:
Authority to pay rent to a non-resident landlord with no tax deducted is generally backdated to the beginning of the quarter in which HMRC receives the non-resident landlord's application. As the tax year for the NRL Scheme starts on 1 April, the quarters are the three-month periods that end on 30 June, 30 September, 31 December and 31 March. So if a non-resident landlord applies to HMRC on, say, 20 September, the authority HMRC send to his letting agent/tenant will usually take effect from 1 July.
Although HMRC refer to 'non-resident' landlords, it is usual place of abode and not non-residence that determines whether a landlord is within the scheme or not.
In the case of individuals, HMRC normally regard an absence from the UK of six months or more as meaning that a person has a usual place of abode outside the UK. It is therefore possible for a person to be resident in the UK yet, for the purposes of the scheme, to have a usual place of abode outside the UK.
You can obtain:
These forms are in PDF format. To view or to download blank forms for future use, you need Adobe Reader.
For help and advice about the NRL Scheme you can contact HMRC PT International by telephone.
Non-resident landlords, who are applying for approval to have rents paid without deduction of tax should send their applications to HMRC at the address stated within this section.
Non-resident landlords who receive rents with no tax deducted will have an HMRC office who deals with them. These are:
For non-resident companies:
HM Revenue & Customs
Non-Resident Company Landlords
St Johns House
Merton Road
Liverpool
L75 1BB
Tel: 0151 472 6208/6209 (from the UK)
Tel: +44 151 472 6208/6209 (from abroad)
Fax: 0151 472 6149
or non-resident trusts:
HM Revenue & Customs
Trusts
Lysnoweth
Trusts Truro Office
Infirmary Hill
Truro
TR1 2JD
Tel: 0845 604 6455 (from the UK)
Tel: + 44 187 224 5406 (from abroad)
Fax: 0151 472 6247
or other individuals
The HMRC office dealing with the non-resident landlords scheme is:
HM Revenue & CustomsFor individuals whose tax affairs are handled by Public Department 1 office contact:
HM Revenue & Customs
Public Department 1
Ty Glas Road
Llanishen
Cardiff
CF14 5XZ
Tel: 029 20 325048
Fax: 029 20 325954
For all other individuals contact us.
Quarterly returns and payments of tax due under the NRL Scheme, made using form NRLQ should be sent to:
HMRC Banking
Bradford
BD98 1YY
Non-Resident Landlord Compliance is responsible for conducting compliance reviews to check that letting agents and tenants are meeting their obligations under the NRL Scheme. Non-Resident Landlord Scheme Operations are responsible for forms NRLY. You can contact them at:
HM Revenue & Customs
PTI Operations
Room 230
St John's House
Merton Road
Liverpool
L75 1BB
Tel: 0151 472 6208 / 6209
Fax: 0151 472 6149
HM Revenue & Customs
Non-Resident Landlord Compliance
Room 240
St John's House
Merton Road
Liverpool
L75 1BB
Tel: 0151 472 6373 / 6338
Fax: 0151 472
6148
Form NRLY is normally sent to letting agents in May each year. You can also ask the Customer Operations Unit to send you one.
Where HMRC refuses, or withdraws, approval to receive rent with no tax deducted, the non-resident landlord can appeal to HMRC within 90 days.
Where HMRC and the non-resident landlord cannot reach agreement, the appeal will be referred to an independent appeal tribunal.
Letting agents that have to operate the NRL Scheme must:
NRL Compliance carry out compliance reviews from time to time to check that letting agents have complied with their obligations under the NRL Scheme.
A key aspect of the inspection involves checking records held by the letting agent.
Tenants who have to operate the NRL Scheme have to:
Tax under the NRL Scheme is deducted by letting agents/tenants.
Letting agents/tenants must calculate the amount to tax each quarter.
They then need to apply the basic rate to arrive at the amount of tax due.
They pay the tax to HMRC Banking, using the quarterly payslip form NRLQ.
How letting agents/tenants calculate the amount to tax
Letting agents or tenants must generally tax the rental income they pay to non-resident landlords unless HMRC has told them not to. In calculating the amount to tax, they take into account any 'deductible expenses' they pay in a quarter. These are expenses that they can reasonably be satisfied will be allowable expenses for the non-resident landlords when the profits of their rental businesses are computed.
Please see the Property Income Manual for advice on allowable expenses.
Letting agents who have to operate the NRL Scheme must send an information return on form NRLY to Customer Operations by 5 July following the year ended 31 March for which the return is made. Letting agents must show separately for each non-resident landlord (other than those gross-approved by Public Department 1):
Letting agents and tenants must pay the tax due each quarter under the NRL Scheme using form NRLQ. Quarterly returns are due for the periods ending 30 June, 30 September, 31 December and 31 March.
Form NRLQ will normally be issued automatically by the:
HM Revenue and Customs
PT International NRLQ Team
St John's House
Merton Road
Bootle
L75 1BB
Letting agents and tenants must enter on form NRLQ:
Letting agents and tenants should send the completed form NRLQ and payment for the amount due to HMRC Banking in time to arrive there no later than 30 days after the end of the quarter to which it relates. For example, the form NRLQ for the quarter to 30 September 2012 must arrive at the HMRC Banking by 30 October 2012.
Letting agents and tenants must keep adequate records to satisfy NRL Compliance that they have complied with their obligations under the scheme. In particular, for each non-resident landlord, letting agents and tenants should keep separately:
Letting agents and tenants should retain records for six years after the end of the year to 31 March to which they relate.
Records may be retained on microfilm, microfiche or any other medium which preserves an exact copy of the original document. Letting agents and tenants who wish to retain documents in this way should contact HMRC PT International before destroying the originals.
Under the NRL Scheme, tax is payable by letting agents and tenants without the need for HMRC to make tax assessments. But where HMRC have reason to believe that:
it can make an assessment.
When an assessment is made, the letting agent or tenant will be told how they can appeal. Appeals have to be made in writing to NRL Compliance within thirty days of the date of the assessment.
Interest is due on amounts paid late. HMRC Banking may charge interest on assessed Income Tax from the date when the amount of tax became due until the date it is paid.
Letting agents who have to operate the NRL Scheme must register with HMRC PT International within 30 days of the date on which they are first required to operate the scheme.
Letting agents may register by completing form NRL4 (PDF 17K) and sending it to HMRC. HMRC will send the letting agent a registration number and the appropriate forms and information needed to operate the scheme.
The basic rate of tax for each tax year can be found in the Rates and Allowances section
All of these forms are in PDF format. To view a PDF document you must have Adobe Reader installed on your machine. If you require this material in large print or Braille please contact HMRC. To save a file to your hard drive, right click on the link and choose the save option.
Form |
Title |
|---|---|
The Non-Resident Landlords Scheme - Guidance Notes for Letting Agents and Tenants |
|
NRLY Annual Return |
|
NRLY Continuation Sheet |
|
NRLY Notes for Completion |
|
A Letting Agent's Guide to the Non-Resident Landlords Scheme (form NRL 200) (PDF 32K) |
This tells letting agents whether they have to operate the NRL Scheme, and what the main responsibilities are. |
A Tenant's Guide to the Non-Resident Landlords Scheme (PDF 27K) |
This tells tenants whether they have to operate the Non-Resident Landlords Scheme, and what the main responsibilities are. |
When calculating the amount to tax, letting agents/tenants should:
plus
less
It is the date letting agents/tenants actually receive/pay the rents (or pay the deductible expenses) that determines when they calculate tax. The periods for which the rents (or expenses) are due are not relevant.
How do letting agents account for tax?
Broadly, in calculating the profits of a rental business, expenses are allowable where:
Information about what constitutes an expense of a 'capital' nature is provided in The Property Income Manual. For example, the cost of land and buildings and the cost of improvements and alterations is expenditure of a capital nature.
Expenses paid by letting agents and tenants which will normally be allowable expenses are:
Letting agents and tenants can deduct only those expenses which they pay or which are paid on their direction. This means they cannot deduct:
