PIM4810 - Overseas landlords - summary of the non-resident landlord scheme

Property income received by non-resident landlords

ITTOIA/S269 and CTA/S5

If property is located in the United Kingdom (UK) then any income generated from it is charged to tax in the UK. This applies even if the property owner is not a UK resident or, for the purposes of the Non-Resident Landlord (NRL) Scheme, has a usual place of abode outside the UK.

Income or Corporation Tax remains chargeable on UK rental income even where the landlord is non-resident for other UK Tax purposes. No Double Taxation Conventions transfer this right to any foreign authority. If the rental income is again charged to tax in a person’s country of residence, then that country may allow double taxation relief.

Summary of how the non-resident landlord scheme operates 

ITA07/S971 and 972

Taxation of Income from Land (Non-residents) Regulations 1995 (SI 1995/2902)

Basic rate Income Tax must be deducted by the landlord’s representative (usually a letting agent, or certain tenants if there is no letting agent) from the UK rental income of landlords whose usual place of abode is outside the UK. The letting agent or tenant must pay the tax deducted directly to HMRC. The landlord may be asked to complete a self-assessment tax return as well if additional tax is due.

However, non-resident landlords (NRLs) have the option of applying for approval to receive their rental income with no tax deducted. If certain requirements are met, approval is granted, and they are required to submit Self-Assessment (SA) returns to declare tax on their rental income. The granting of approval does not grant exemption from UK tax; any liability is dealt with under SA. See page PIM4860.

Individuals, companies and trustees can be NRLs. For partnerships, each partner is treated as a separate landlord.

Non-Resident landlord’s representative 

The NRL’s representative could be:

  • A letting agent who handles or controls UK letting income on behalf of a landlord whose usual place of abode is outside the UK; or
  • A tenant who makes payments directly to a landlord whose usual place of abode is outside the UK.

For the purposes of the scheme, ‘letting agents’ are persons who act in the management or administration of a non-resident landlord's property business. This may include friends and relatives of a non-resident landlord as well as professional agents.

In the regulations, the non-resident landlord’s representative is referred to as a “prescribed person”.

Summary of letting agents’ and tenants’ responsibilities 

Unless they have been notified by HMRC 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.

Tax withheld must be accounted quarterly to HMRC (using return form NRLQ) within 30 days of the end of the quarter. Quarters run to 30 June, 30 September, 31 December and 31 March. If there is no tax liability in any given quarter, letting agents and tenants need not complete a quarterly return (unless, exceptionally, HMRC issues them with a notice requiring a return).

Letting agents and tenants of NRLs must also make annual information returns on or before 5 July 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.

For more detail on letting agents’ responsibilities, see page PIM4820

For more detail on tenants’ responsibilities, see page PIM4830

Meaning of ‘usual place of abode’

The NRL Scheme applies in relation to landlords whose ‘usual place of abode’ is outside the UK. Their residence status for UK tax purposes is not determinative. Although there is no statutory definition of ‘usual place of abode’ the NRL Scheme will apply to all landlords outside the UK for a period that exceeds, or is expected to exceed, more than six months.

For more detail on usual place of abode, see page PIM4850.

De minimis limits

Tenants who make payments directly to a landlord whose usual place of abode is outside the UK, or to a person who is not a ‘non-resident landlord’s representative’, 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 HMRC.

There is no de minimis limit for rent paid to a landlord via a letting agent.

Guidance

HMRC has published detailed online guidance for letting agents and tenants about how to operate the scheme.