As stated in one of our previous blogs one of our biggest concerns when it comes to landlords is the incorrect assumption that there is nothing to report if there is no profit from the business. In some circumstances this can lead to HMRC enquiries, interest and penalties being charged because a landlord has not understood what is required of them.
Owners of Furnished Holiday Lets who are not resident in the UK have obligations under the Non Resident Landlord Scheme (NRLS), just as they would with any other property income. You must comply with the requirements of NRLS as well as considering your tax position in your country of residence.
Although 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.
A NRL can apply to receive his rents gross by completing form NRL1i (individuals), form NRL2i (companies) or form NRL3i (trustees and estates). HMRC will normally grant permission for this if the landlord can demonstrate that:
- he has complied with his UK tax obligations (ie he has submitted the tax returns and paid the tax due to date);
- he has never had any UK tax obligations; or
- he does not expect to be liable to pay UK income tax for the year in which his application is made (note that in order to qualify under this heading, it is not sufficient that no liability will arise in respect of the let property; there must be no liability to UK income tax at all).
HMRC may refuse or withdraw permission to receive gross and in these instances an appeal would need to be sent to HMRC in writing within 90 days of permission being withdrawn.
The NRL will then be required to complete an annual Self Assessment tax return and ensure that any liability is paid on time.
This blog is the fourth in a series - you can see the first three blogs here: