non resident landlords scheme

by **petergibbinson** on Thu Oct 06, 2011 3:45 am

I am registered and approved for the non resident landlords scheme (I rent several properties out via agents) I am about to rent a new property out, but it will be direct to the tenant. The rent is less than 5200 GBP per year.
My undertsanding is the tenant has no liability to apply or withold tax as it is below the 5200 GBP threshold (they wouldnt need to anyway as I am approved) However do I still need to inform the HMRC about the tenant as the sum is below the 5200 GBP threshold? (obviously I will account for it on my tax return as normal for all my rentals)
As an aside how many tenants would have any idea of the non resident scheme and their potential responsibilities? My experience over the years is close to zero...expecting the tenant to withold rent strikes me as pretty ridiculous and unenforceable.

by **Peter D** on Thu Oct 06, 2011 7:19 am

The £5,200 threshold applies when the landlord is non resident. However, you can apply as a landlord on form NRL1 to the Centre for Non Residents for approval to receive your rental income gross.
You are registered and the threshold does not apply to your scenario. Regards Peter

by **etf** on Thu Oct 06, 2011 9:32 am

Hi Peter,

I have copied below an extract from the NRLS Revenue notes:

HMRC may sometimes instruct tenants to operate the scheme even where the rent paid is less than £100 a week.

To be able to consider carrying out the above, HMRC will have to be aware of the tenant in the first place and therefore I suggest you advise them of your new property and tenant. As Peter D says, as long as HMRC are happy for you to receive your rent gross, your tenant should not have to deduct tax at source from the rent paid to you.

I suspect most tenants are unaware of the potential requirement to withhold tax from rent paid to a non-resident landlord and in my experience HMRC appreciate this and do not take any retrospective action where a tenant has not observed the rules.

Kind Regards

etf

http://theexpatriatetaxfactory.com

by **section 44** on Thu Oct 06, 2011 3:45 pm

Is your tenant familiar with the non-resident landlord scheme (NRLS)?

If it is not familiar with NRLS then would it actually withhold tax from the rent it pays you?

If it is familiar with NRLS then presumably it would also know that you being registered to receive rent gross is not sufficient to absolve it of its obligations under NRLS and that it would need to receive a direction from HMRC confirming that it can pay rent gross.

by **maths** on Thu Oct 06, 2011 7:19 pm

The requirement to operate the tax deduction at source on rents paid direct to non-resident landlords by tenants is inapplicable where the rent per annum is £5,200 or less.

This is specifically provided for in Reg 3(5) SI 1995/2902.

ETF's quotation from HMRC literature, I would suggest, does not mean that notification to HMRC is required for them to take a decision; the SI seems quite clear.

I agree with section44 that approval to pay rents gross is not a blanket approval and new tenants must be notified by HMRC if they are to be allowed to pay rents "gross"; however, this does not apply re the £5,200 "let-out".

by **petergibbinson** on Fri Oct 07, 2011 6:45 am

So in a nutshell do I go thorought he hassle of sitting on t he phone, waiting forever for the HMRC to pick up to tell them I have a tenant paying rent direct at under 100 GBP per week, or do I not bother and account for it on my tax return as normal?

by **etf** on Fri Oct 07, 2011 7:23 am

Peter,

I'm a cautious person and so like the comfort of a tangible letter on file from HMRC confirming rent can be received gross for a given property, even if Math's stella technical analysis confirms this is unnecessary. If you are of a similar disposition then you may like to follow my suggestion, otherwise select Math's option.

Kind regards

etf

http://theexpatriatetaxfactory.com

by **maths** on Fri Oct 07, 2011 1:05 pm

Peter

Each of us have proffered advice in response to your query yet you now ask

do I go through the hassle of sitting on the phone, waiting forever for the HMRC to pick up to tell them I have a tenant paying rent direct at under 100 GBP per week, or do I not bother and account for it on my tax return as normal?

This is not a technical query but seems to be a bit of a rant about HMRC.

My advice appears to me crystal clear and etf''s latest posting sums up the position as between us admirably, if i may say.

There appears to be nothing further to advise on.