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HMRC internal manual

Property Income Manual

Overseas landlords

Summary
Outline of the Non Resident Landlords (NRL) Scheme
Letting agents
Meaning of ‘usual place of abode’
De minimis limits
Approval to receive rental income with no tax deducted
Failure to operate the scheme
Handling enquiries
New cases
Assessing procedures 

Summary

If a landlord usually lives outside the United Kingdom (UK) their letting agent or tenant normally has to deduct tax from property income. However, these landlords can apply to Specialist Personal Tax (SPT) Personal Tax International (PTI) 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

Outline of the Non Resident Landlords (NRL) Scheme

The NRL 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 and
  • tenants who make payments directly to a landlord whose usual place of abode is outside the UK

unless they have been notified by SPT PTI 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 Shipley (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, SPT PTI issues them with a notice requiring a return).

Letting agents and tenants of non-resident landlords must also make annual information returns to SPT PTI (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.

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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.

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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.

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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 SPT PTI.

There is no de minimis limit for letting agents.

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Approval to receive rental income with no tax deducted

Non-resident landlords can apply to SPT PTI 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.

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Failure to operate the scheme

If you discover a letting agent, or a tenant paying rent above the de-minimis limit to a non-resident landlord, appears to be failing to operate the scheme, you should refer the information to

HMRC Personal Tax International
Risk Team, S0708
PO Box 203
Bootle
L69 9AP

who are responsible for letting agent and tenant compliance.

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Handling enquiries

The scheme is handled by SPT PTI and they will deal directly with landlords, tenants and agents on questions about its operation. The only exception is that non-resident landlords who are dealt with by Public Departments 1 who submit their applications to that office.

Questions about a landlords own tax affairs/liability should be dealt with by the appropriate responsible office for the non resident landlord:

Non Resident Company SPT PT International
   
Non Resident Trust SPT Trusts
Non Resident Individual Customer Operations

 
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 about the scheme or landlords, agents and tenants applications should be referred to:

HMRC Personal Tax International
Operations, S0708
PO Box 203
Bootle
L69 9AP

Or by phoning the Non Resident Landlord helpline on:
03000 516644 or 516651 (from the UK)
or +44 3000 516644 or 516651 (from abroad)
Fax: 03000 547381

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New cases

Where you find that an individual goes abroad and rents out their UK property, you should take the following action:

  • set up a self assessment record
  • issue form NRL1 (in the case of co-owned property - including married couples and civil partners - one to each co-owner). (The customer will be directed to return the NRL1 to SPT PT International who will then review it)
  • Make a note on the SA record that you have issued an NRL1

Once the application is approved, SPT PTI will notify you using form NRL11. You should make a note of this approval and the registration number in SA Permanent Notes and set the profile to ensure that Land & Property and Non Resident pages are issued with Self Assessment Returns.

If you need advice on the taxpayers residence position you should consult the guidance in the Residence, Domicile and Remittance Basis Manual (RDRM).

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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 SPT PTI will decide that an assessment is needed - SI1995/2902 Regulation10.

SPT PTI has responsibility for issuing assessments on letting agents and tenants. Any enquiries should be directed to
 
HMRC Personal Tax International
Operations, S0708
PO Box 203
Bootle
L69 9AP
 
or by phoning the Non Resident Landlord helpline on 03000 516644 or 516651 (from the UK)
or +44 3000 516644 or 516651 (from abroad) .

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 Tribunal Services and, should the need arise, you will be contacted about the Tribunal Services procedures.