The Non-resident Landlords Scheme
(payment of rents to overseas landlords)
The Non-resident Landlords 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 unless the agent has authority to pay the particular landlord his rental income gross (without deduction).
Non-resident landlords are persons (this term includes individuals, companies and trustees) who have UK rental income, and a “usual place of abode” outside the UK. Although the scheme refers 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, the Revenue regards an absence from the UK of 6 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.
When working out the amount to tax, the letting agent can take off deductible expenses and the Inland Revenue will tell an agent 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 the Inland Revenue sends them.
Applications to receive rent with no tax deducted:
Non-residents 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 on form NRL1 which is available at www.hmrc.gov.uk/cnr/nrl1.pdf or by phoning 0151 472 6208/9
Refusal of approval
The Inland Revenue may refuse approval if they are not satisfied that:
- the information in the application is correct, or
- the non-resident landlord will comply with their UK tax obligations.