UK property income is subject to UK taxation in full irrespective of the residency position of the owner of the property, as such all non UK residents are taxable on any UK rental income they receive. The information about the income, any tax withheld at source under the Non Resident Landlord Scheme (see below) along with a claim for any allowable expenditure incurred is submitted to HM Revenue and Customs on a UK Self-Assessment tax return.
In order to determine the individual’s residency position, the Statutory Residence Test is applied after 06 Apr 2013, different UK residency legislation applied prior to this date. However, under both the old and new UK residency rules and without exception, you will be resident for UK tax purposes if you spend 183 days or more in the UK in a tax year. The following Non exhaustive list of factors can also affect the UK residency position:
where your main home is;
if you have a home in the UK;
if you are working in the UK or abroad;
if you have family and other ties to the UK, etc
The UK tax year runs from 6 April to the following 5 April. If a tax return is due to HMRC it must be submitted by 31 January following the end of the tax year to which it relates in order to avoid automatic late filing penalties. In this regard, a tax return due for 2014/15 tax year must be filed by 31 January 2016. If any tax is due to HMRC, it becomes payable on the same date as the submission date of the tax return for the year i.e. the 2014/2015 tax liability is payable by 31 January 2016.
Non-Resident Landlords Scheme (NRLS)
The Non-Resident Landlords Scheme is a scheme applicable for the UK rental income of persons whose usual place of abode is outside the UK.
In the first instance and in the absence of an application to the contrary, the letting agent for the property, or in the absence of an agent, the tenant, are obliged by law to deduct basic rate tax (currently 20%) from the rent and pay it over to HMRC. Non-resident landlords can set off the tax deducted from their UK rental income under NRL Scheme against their own tax bill when completing their UK self-assessment tax return. They can also claim repayment of any excess tax deducted from their rental income.
Under the NRLS a Landlord can apply to HMRC to have their rental income received gross. Broadly speaking the criteria to make a successful application are as follows:
• UK tax affairs must be up to date • They have not have any other UK tax filing obligations • They do not expect to be liable to UK Income Tax for the year in which they apply.
It should be noted that where a Landlord has successfully applied to receive rental income gross, this does not mean that the income is exempt from UK tax; it remains taxable and a UK Tax Return must be filed for each tax year in which they receive UK rental income.
Property Tax International can organise the completion and filing of all necessary UK tax returns.
The information provided here is intended as a guide only. While Property Tax International Limited makes every effort to ensure that the information contained herein is accurate, we take no responsibility or liability for any inaccurate, delayed or incomplete information, nor for any actions taken in reliance thereon.
Property Tax International is a trading name of Taxback Returns which is part of the Taxback Group incorporating taxback.com providing financial services since 1996