PIM4800 - Overseas landlords

Summary

From 6 April 1996, if a landlord usually lives outside the UK their letting agent or tenant normally has to deduct tax from property income. However, landlords can apply to Charities Assets and Residency (CAR), Residency for approval to receive the income of their rental business with no tax deducted.

There is further information on the non-resident landlord scheme on the HMRC web site at:

http://www.hmrc.gov.uk/cnr/nr_landlords.htm

Statute

This scheme applies from 6 April 1996 and is governed by

  • ICTA88/S42A for 1996-97 to 2006-07,
  • ITA/S971 and S972 for 2007-08 onwards, and
  • Regulations in SI1995/2902.

Previous rules

Up to and including 1995-96 different rules applied; that is those in ICTA88/S43 and TMA70/S78. If you need guidance on the old rules please refer to CT&VAT (Technical).

Outline of the new scheme

The new scheme applies to:

  • letting agents who handle or control UK letting income on behalf of a landlord whose usual place of abode is outside the UK.
  • tenants who make payments directly to a landlord whose usual place of abode is outside the UK.

Unless they have been notified by CAR Residency that they must pay rental income with no tax deducted, letting agents must deduct and account for tax on rental income received less allowable expenses paid. Tenants must deduct and account for tax on rental income paid direct to the overseas landlord.

Letting agents and tenants must account quarterly to Accounts Office Cumbernauld (using return form NRLQ) for the tax deducted, without the need for an assessment, within 30 days of the end of the quarter. Quarters run to 30 June, 30 September, 31 December and 31 March. Letting agents and tenants with no tax liability for a quarter need not complete a quarterly return (unless, exceptionally, Audit & Pension Scheme Services (APSS), issues them with a notice requiring a return).

Letting agents and tenants of non-resident landlords must also make annual information returns to APSS (on form NRLY) with the exception of tenants authorised to pay their landlord with no tax deducted. Letting agents must complete annual information returns even if they are authorised to pay all their non-resident landlords with no tax deducted.

Letting agents

For the purposes of the scheme, ‘letting agents’ are persons who act in the management or administration of a non-resident landlord's rental business. This may include friends and relatives of a non-resident landlord as well as professional letting agents.

Meaning of ‘usual place of abode’

'Usual place of abode' is not identical in meaning to residence, or ordinary residence, but a person who is not resident in the UK should normally be treated as having their usual place of abode outside the UK. You should interpret the term in accordance with the following guidelines.

  • Individuals have a usual place of abode outside the UK if they usually live outside the UK. You should still regard the term as applying to them even if in a particular year they are resident in the UK for tax purposes, as long as the usual place of abode is outside the UK. (For example the individual may count as resident in the UK in a particular year because of a six months' visit, or a visit of a shorter time when he has a place of abode available in the UK.) Do not treat someone as having their usual place of abode outside the UK if they are only temporarily living outside the UK, say for six months or less.
  • Companies that have their main office or other place of business outside the UK, and companies incorporated outside the UK, will normally have a usual place of abode outside the UK. However if the company is treated as resident in the UK for tax purposes, do not treat it as having a usual place of abode outside the UK.
  • Trustees have a usual place of abode outside the UK if all the trustees have a usual place of abode outside the UK.

De-minimis limits

Tenants who make payments directly to a landlord whose usual place of abode is outside the UK and who pay less than £100 a week in rent, do not have to deduct and account for tax unless they have been told to do so by CAR Residency. There is no de-minimis limit for letting agents.

Approval to receive rental income with no tax deducted

Non-resident landlords can apply to CAR Residency for approval to receive their rental income with no tax deducted if:

  • their tax affairs are up to date, or
  • they have never had any UK tax obligations, or
  • they expect not to be liable to UK income tax.

They must also undertake to comply with SA.

Handling enquiries

The scheme is handled by CAR Residency and they will deal directly with landlords, tenants and agents. The only exception is that non-resident landlords who are dealt with by Public Departments submit their applications to that office.

If you discover a non-resident landlord who you suspect may not be known to CAR you should refer the relevant information to CAR Residency.

If you discover a letting agent, or a tenant paying rent above the de-minimis limit to a non- resident landlord, who appears to be failing to operate the scheme, you should refer the information to APSS, who are responsible for letting agent and tenant compliance.

If you receive enquiries from a non-resident landlord they should be advised that there is further information on the HMRC web site at:

http://www.hmrc.gov.uk/cnr/nr_landlords.htm

Detailed enquiries should be referred to:

CAR Residency
St John's House
Merton Road
BOOTLE
Merseyside
L69 9BB
Telephone: 0151-472-6208/6209
Minicom: 0151-572-6112
Fax: 0151-472-6067

Or from agents and tenants to:

APSS
Room 321
St John's House
Merton Road
BOOTLE
Merseyside
L69 9BB
Telephone: 0151-472-6218
Minicom: 0151-472-6112
Fax: 0151-472-6124

New cases

Where an individual who owns or has an interest in property, including his or her residence, goes abroad, their latest HMRC office should enquire whether income from property will be received by the individual. Do this by issuing form P85 - see EIM42920 onwards. Where the reply shows that income will arise from property you should:

  • issue form NRL1 (in the case of co-owned property - including married couples and civil partners - one to each co-owner), and
  • send a copy of form P85 to APSS at the address shown above.

The copy P85 is used by APSS solely for the purpose of the NRL scheme. No other attachment should be sent to APSS.

If you need advice on the taxpayers residence position or taxation while abroad you should make a submission to CAR Residency in accordance with RG1.3.

Assessing procedures

Under the scheme, tax is payable quarterly by letting agents and tenants without the need for an assessment. However, there will be circumstances in which APSS will decide that an assessment is needed - SI1995/2902 Regulation10.

From 1 November 2002 APSS has responsibility for issuing assessments on letting agents and tenants. Any enquiries should be directed to the NRL Business Manager in APSS or contact may be made by telephone on 0151-472-6218.

Assessed tax carries interest, at the same rate as interest under TMA70/S87, from 30 days after the end of the quarter, irrespective of the date the assessment was made.

Appeals will continue to be heard by the General Commissioners and, should the need arise, you will be contacted with respect to taking appeals before them.

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