Non-resident landlords

Produced by Tolley in association with Janet Paterson of Charter Tax
Non-resident landlords

The following Owner-Managed Businesses guidance note Produced by Tolley in association with Janet Paterson of Charter Tax 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
  • What happens if permission to receive the rental income gross is not given?
  • Financing costs ― special rules for agents of non-resident company landlords
  • Acquisition vehicle
  • Non-natural persons
  • Interaction between ATED-related gains and FA 2015 NRCGT (relevant only to disposals made prior to 6 April 2019)
  • Individuals
  • Further reading
  • More...

Non-resident landlords (NRLs) are subject to the non-resident landlords scheme (NRLS). Although the UK does not generally tax non-residents, it does so 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.

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, such non-resident parties in receipt of UK rental income might avoid the UK tax charge that is due. Accordingly, while there is officially no withholding tax on the payment of rental income to NRLs, 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.

When looking at the operation of the NRLS, there are several points to consider:

  1. whether the NRL will be granted permission to receive the rental income gross

  2. the ongoing requirements are from an NRL where gross status has been granted

  3. the impact of the denial of permission to receive the income gross

It is also helpful to understand some of the basic planning issues relevant to NRLs including in particular:

  1. the acquisition vehicle

  2. interest planning

It is also worth noting that if the property is commercial, the NRL will need to consider whether the company should register for VAT.

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