Income from property rentals for non resident landlords is liable for tax as is any income generated in this country. From 1996 the legislation in force for collecting applicable tax has been referred to as non resident landlord (NRL) scheme and landlords can apply for an exemption certificate through any registered agent responsible for collecting the income on their behalf.
Castle Estates Staffordshire are registered with the tax authorities to deal with this on our landlords behalf (registration number NA028323)
Otherwise, if an exemption certificate has not been obtained from the Inland Revenue, Castle Estates, as your managing agent, will be obliged to pay the current tax rate (presently 20%) to the Inland Revenue of the net rental income every quarter. Net rent means the gross rents, less any expenses paid out by Castle Estates, i.e. our charges, maintenance bills etc. No other expenses or allowances can be taken into consideration.
In practice, this means our creating and holding a tax reserve by retaining 20% of gross rents each month on all of our overseas Landlords, including Crown Servants, calculating the tax due and paying this amount to the Inland Revenue each quarter, before paying any surplus reserve to you at that time. At the end of each tax year we are required by law to submit a detailed statement to the Inland Revenue showing gross rents received, expenses paid out by us, and tax paid.
Other expenses and allowances relating to the letting that are not paid out by Castle Estates will still be allowable against the final tax bill, and as at present will need to be submitted to the Inland Revenue at the end of each financial year. Any tax overpaid will then be refunded to you directly from the Inland Revenue.
All of the above is the bad news of this legislation. The good news is that under the new self assessment rules the Inland Revenue are shifting the onus of responsibility for paying tax onto the taxpayers themselves wherever possible. Therefore by obtaining an exemption certificate overseas landlords can apply for Inland Revenue permission to have their rental income paid to them gross, without deduction of tax and, when approved, can submit their own returns of UK rental income as per a UK resident Landlord.
Provided you have a good tax history and your tax affairs are up to date, you will be issued with an exemption certificate, a copy of which should be sent directly to us. Once we have an exemption certificate in our possession we will be able to pay you with no tax deduction.
Please note that it is only the individual landlord (this includes all joint owners) that can apply for an exemption certificate - we cannot do it for you and neither can your accountant. Application forms are available on line.
The Inland Revenue normally processes applications reasonably quickly and as it is in your interest to obtain an exemption certificate before the start of any tenancy so that all income can be applied to the exemption certificate if and when received.