New regulations came into force in 1996 on responsibility for tax liabilities on rental income for non-U.K. resident landlords. We can advise you of your liabilities and the procedures to be followed to satisfy the Inland Revenue, briefly outlined below:
If your normal place of work is not the UK, you will normally be considered by the Inland Revenue as “non-resident” for taxation purposes.
Under the Income Taxes Management Act 1970 as amended by the Finance Act 1995 the Inland Revenue will require us, as your agent, to withhold tax from the rental income at basic rate (currently 20%) and to pay tax over quarterly to the Inland Revenue.
However, you can apply to the Centre for Non-Residents (CNR) for an “Approval number” which will allow for your rental income to be paid without deducting tax. This will involve you:
• agreeing with the Inland Revenue that your tax affairs are up-to-date or that you have no tax liability
• submitting to the Inland Revenue an Annual Statement of Income and Expenditure and net tax liability
• informing the Inland Revenue when you return to the UK to live.
When approval has been given, the Inland Revenue sends
• a notice of approval to receive rent with no tax deducted to you, the landlord, and
• a separate notice to us, the letting agent (or tenants named on the application form) authorising us to pay rent without deducting tax.
This authority to pay rent with no tax deducted is generally backdated to the beginning of the quarter in which the Inland Revenue receives the application. As the tax year for the Non-resident Landlords 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 you were to apply to the Inland Revenue on, say, 20 September, the authority sent to us (or the tenant) will usually take effect from 1 July.
Applications should be made via the following forms:
• NRL1 (for individuals)
• NRL2 (for companies)
• NRL3 (for trustees)
• By letter (for foreign immunes)
Many people are entitled to set personal allowances against their income. If your income after allowable expenses is less than the available personal allowances, you will not be liable for tax.
To download these forms or for further information on overseas landlords tax, please visit www.inlandrevenue.gov.uk.
