HMRC reminds agents about taxing non-resident landlords

HMRC has issued a reminder to letting agents about how operate the Non-resident Landlords Scheme.

This requires anyone in the UK who pays rent to, or collects rent for, a non-resident landlord to deduct basic rate tax from the rent. 

A statement from HMRC says: “The people it mostly affects are letting agents, which can be anyone from a professional letting company to a friend or relative appointed by the non-resident landlord. The scheme applies to letting agents regardless of the amount of the rent involved. If the non-resident landlord does not have a letting agent, his tenant must deduct the tax - but only if the rent is more than £100 a week.”

The scheme is complicated with the agent being expected to take off deductible expenses - which are not identical to the allowable expenses for property income for UK based landlords - and in any case the requirement on the part of letting agents to deduct tax does not apply to non-resident landlords who have obtained HMRC approval to have their UK rent paid to them gross. 

Agents who have to operate the Non-resident Landlords Scheme must register with Personal Tax International, account quarterly for any tax to the HMRC, complete an annual information return and provide their non-resident landlords with an annual certificate of tax liability, and must keep records to show that they have complied with the requirements of the scheme.

The new statement from HMRC gives this warning: “From time to time auditors from Personal Tax International visit letting agents and tenants to ensure that they are complying with their statutory obligations under the Non-resident Landlords Scheme.”

The details of the scheme, updated this week, can be found here.