Are you a landlord who spends more than six months abroad, but has to take off your property within the UK as well? You’re probably here to find out more about the non-resident’s landlord scheme.
How to Make the Most Out of Non-residents landlord scheme?
It’s a special tax scheme so it always applies to landlords. Under the scheme, tax is deducted by a letting agent or tenant from the rent paid to the non-resident landlord and paid over to HMRC.
When Do Tenants Fall Under the Landlord Scheme?
A tenant falls within the NRL scheme when the landlord doesn’t live in the UK. The rent paid to the landlord is more than £100 a week.
Where the rent is less than £100 a week (£5,200 a year), the tenant is not required to deduct tax from the rent (unless told to do so by HMRC). The tenant is also relieved of the obligation to deduct tax if HMRC doesn’t notify the tenant in writing.
The landlord receives the rent without tax being deducted. The tenant must still register with HMRC and complete an annual return.
Where the tenant pays rent to a letting agent, it’s the letting agent rather than the tenant who must operate the scheme.
How to Make Sure the Letting Agents Operate the NRL Scheme?
Letting agents must operate the NRL scheme to collect rent on behalf of a non-resident landlord. It’s completely regardless of the rent collected (unless HMRC has informed the letting agent in writing that the landlord can receive the rent without tax being deducted).
Who is a letting agent?
A letting agent is someone who helps the landlord run their business, receives rent on their behalf or controls where it goes and who usually lives in the UK.
Comply with the scheme
To comply with the scheme, tenants and letting agents must
- Register with the HMRC charity, savings, and International department within 30 days of the date on which they are first required to operate the scheme. Letting agents should use form NRL4i and tenants should write to HMRC
- Work out the tax to be deducted each quarter.
- Send quarterly payments of tax deducted to HMRC Accounts Office, Shipley
- Send a report to HMRC and the landlord by 5 July after the end of the tax year on form NRLY
- Provide the non-resident landlord with a certificate of tax deducted each year (on form NRL6)
- Keep records for four years to show that they have complied with the scheme
Calculate the Tax
Tax should be calculated on a quarterly basis on:
- Any rental income paid to the landlord in the quarter.
- Any payments that they make in the quarter to third parties which are not ‘deductible payments’
Deductible payments are for the tenant or letting agents help them stay reasonably satisfied for deductible computing profit of the landlord’s property rental business. Reassuringly, in their guidance, HMRC states that they ‘do not expect to let agents and tenants be tax experts’.
The quarters run to 30 June, 30 September, 31 December and 31 March. The tax deducted must be paid over to HMRC within 30 days of the end of the quarter.
The non-resident landlord
The non-resident landlord can set the tax deducted under the scheme against that payable on the profits of his or her property rental business.
Additional note: The Taxation of Income from Land (Non-residents) Regulations 1995 (SI 1995/2002).