Individuals or companies who reside outside of the UK but own and rent out UK property may be liable to UK tax reporting obligations under the Non-Resident Landlord Scheme.
Rental income derived from UK properties (whether residential or commercial) is taxable within the UK. How this income is taxed is dependent upon whether the landlord is an individual or a company and whether a letting agent is used.
With the introduction of new legislation it can be tricky to ensure that you are correctly disclosing and reporting to HMRC any income from rental or gains which have arisen on a property disposal and/or that disclosure is in the correct format. This is before you even consider the rebasing rules and the different methods for calculating any gain on disposal!
Non-Resident Individuals
Individuals who receive their rental income gross (i.e., without the use of a letting agent) need to report this via a UK Self-Assessment Tax Return within the normal reporting period obligations (31 January following the end of the tax year).
Non-Resident Companies
From 6 April 2020, non-resident companies fall within the corporation tax regime for rental income received (previously under the Self Assessment rules as above), and income is taxable at 19% and reported on a corporation tax return. Normal corporation tax reporting period obligations apply to non-residents.
From 1 April 2023 the corporation tax rate is due to rise to 25% and whilst this is for companies with profits in excess of £250,000, the new rate will also apply to close investment holding companies, with some non-resident companies liable to the increased rate.
Disposal of Property
When it comes to a disposal of any UK land or property (either direct or indirect) the rules to calculate the gain arising can be complex, with different methods available and different re-basing values to be used depending upon the property type.
Normally, non-residents are not subject to UK tax on any capital disposal made. However, under the new legislation Non-Resident Landlords are now brought within the scope of UK tax when disposing of UK properties.
Non-Resident Individuals
Non-resident individuals are subject to UK Capital Gains Tax on the disposal of property, which needs to be reported to HMRC within 30 days of completion via an NRCGT return (Non-resident Capital Gains Tax Return) and any subsequent liability paid, leaving very little time to adhere to these reporting requirements and obtain the cash funds to settle any liability.
Non-Resident Companies
Non-Resident Companies are subject to Corporation Tax on any gains arising from the disposal, however the disposal is reported on the Corporation Tax return with the normal submission and liability due dates applying, meaning that companies have a much longer period to settle any liability due.
How can we help?
Here at Armstrong Watson, we have qualified Chartered Tax Advisers within the tax consultancy team who can provide advice and assistance in all areas under the Non-Resident Landlord Scheme to ensure that you are meeting your UK tax obligations.
We have prepared many non-resident landlord returns (for both individuals and companies) and disposal calculations for numerous clients and would be more than happy to assist where we can.
Call NOW to speak to one of our advisers.
Call: 0808 144 5575
