Non-resident landlords

By Tolley
Non-resident landlords

The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Non-resident landlords
  • Permission to receive rental income gross
  • Ongoing requirements where gross status granted to NRL
  • Denial of permission to receive gross rental income
  • Acquisition vehicle
  • Interest planning
  • Non-resident corporate landlords ― the move to corporation tax
  • Non-resident corporate landlords ― transitional rules from 6 April 2020

Non-resident landlords (NRL) are subject to the non-resident landlords scheme (NRLS). Although the UK does not generally tax non-residents (see the Residence of companies guidance note), it does apply tax in respect of UK source income, and in particular in respect of rental income from UK properties.

From 6 April 2020, non-UK resident companies are chargeable to corporation tax rather than to income tax on profits of a UK property business and ‘other UK property income’. There are transitional rules that apply for accounting periods that straddle this commencement date. These are discussed below.

FA 2019, s 17, Sch 5

In addition, with effect for disposals made on or after 6 April 2019, the charge to tax on capital gains is extended to non-UK residents that hold UK land (whether residential or non-residential) and to disposals of interests in certain entities which derive 75% or more of their gross asset value from UK land. See the Overview of the rules on disposals of interests in UK land by non-residents guidance note for further details.

Without special provisions, non-UK resident landlords could evade the UK tax charge by virtue of their absence and non-declaration of this income. While there is officially no withholding tax per se on the payment of rental income to an NRL, the NRLS requires an effective withholding tax to be deducted by either the tenant or letting agent, as appropriate, unless the landlord obtains permission from HMRC to receive the rental income gross. It is therefore necessary to consider:

  • whether the NRL will be granted permission to receive the rental income gross
  • the ongoing requirements from the NRL where gross status has been granted
  • the impact of the denial of permission to receive the income gross

It is also helpful to understand some of the basic planning

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