20th December 2013 by Simon Misiewicz
Are you earning money whilst you are living abroad?
Are you earning money from overseas?
The subject of UK and international tax is complex to say the least. As you would expect from having multiple countries tax you at the same time in some instances.
As such we have written a number of articles to help you along.
Part 1: Paying tax in the UK depends on where you live
Part 2: Rental income from property
Part 3: Capital Gains Tax (CGT), UK and international tax
Part 4: Domicile & leaving the UK
Part 5: Double Taxation Agreements (DTA) & IHT
Without further delay let us help you with the complex subject of UK and international tax.
Part 2: Rental income from property
You may be a UK national that is either thinking or already are living abroad. You still need to think about the UK taxation of your income from property and capital gains tax if the property is in the UK. (1)
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. (7)
You may also be a non UK national but have assets in the UK. These too are taxable under HMRC Non-resident Landlord Scheme. (1)
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) tell 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. (7)
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:
• an individual NRL1i notes are incorporated
• a company NRL2i notes are incorporated
• a trust NRL3i
• letter for sovereign immunes
Completed NRL applications should be sent to:
HMRC Personal Tax International
NRL Scheme Compliance S0708
PO Box 203
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. (7)
Non-resident landlords can apply to receive their rent with no tax deducted on the basis that either:
• their UK tax affairs are up to date
• they have not had any UK tax obligations before they applied
• they do not expect to be liable to UK Income Tax for the year in which they apply
• they are not liable to pay UK tax because they are sovereign immunes (these are generally foreign Heads of State, Governments or Government departments)
Letting agents that have to operate the NRL Scheme must: register with HMRC PT International and account quarterly for the tax due under the scheme by 5 July. Then following the year that ends 31 March, they will need to complete an annual information return where they have deducted tax. They must then give the non-resident landlord a tax deduction certificate NRL6. (7)
If you are looking for an accountant or thinking of changing your current accountant because they do not understand property investing then please contact Selina on firstname.lastname@example.org to book in your free “Property Finance & Tax Mastery” free one to one consultancy slot.
If you would like further information on property finance and taxation matters then please visit our website www.optimiseaccountants.co.uk, visit us on Facebook https://www.facebook.com/OptimiseAccountants and Twitter https://twitter.com/Simon_Optimise