Experts in Personal Taxation, Residence & Domicile
Dowload our leaflet for the non resident landlord here
Rental Income
Regardless of your residence status or indeed country of residence income from UK property remains liable to income tax here.
You should register under the Non Resident
Landlord Scheme to ensure that your rent is paid to you without the deduction of tax at source. This does not exempt you from UK Tax but does improve cash flow.
The current penalty regime means you must review
your income and expenditure annually and where a tax return is late an automatic penalty of £100 will apply.
Expenses that are incurred wholly and
exclusively for the “business” of renting your property are usually allowed as a deduction against the rent receivable. Usually, loan interest is allowed where the loan has been taken to purchase the
property or replace an existing debt but care is required with high loan to value loans and non resident properties where there is a greater restriction.
Whether expenses are allowable is a favourite
area for investigation by the HMRC often leading to penalties where non allowable expenses have been claimed.
Tax Returns, Record Keeping and Penalties
Tax Returns must be submitted under the strict
Self Assessment deadlines and usually online. It is a Penalty offence not to retain accurate records.
If you fail to notify a liability, submit a
timely Return or pay your tax on time automatic penalties, surcharges and interest will accrue. The current penalty regime means that penalties of up to
200% of any over due tax can be charged. In addition to the automatic £100 penalty, a tax return that is 6 months late could lead to penalties of
£1,300.
Ownership Structures and Tax Free Personal Allowances
By far the simplest way to own a property is to
purchase it in your own name. However, trusts and non UK resident companies can have significant Income and Inheritance Tax advantages.
Against this the government have introduced
introduced additional taxes for properties that are owned by non natural persons and/or valued in excess of £2million. They have also proposed the extension of capital gains tax to properties owned
by non natural persons (broadly but not exclusively non resident companies and trusts) even if the ultimate owners are not resident in the UK.
Professional advice should therefore be sought
about how to structure the ownership of UK property.
Tax Free Personal Allowances
You may be entitled to UK tax free personal
allowances. However, since 6 April 2010 only citizens and residents of the European Economic Area are entitled to these unless a Double Tax Treaty allows them. The Hong Kong/UK DTA, does not, for
example, grant allowances to non EEA citizens who are Not Resident in the UK.
Capital Gains Tax
From 6 April 2015 non residents are within CGT
on the disposal of most residential property. It is possible to use the 5th April 2015 value (known as re-basing) as the cost in the tax computation, the actual cost of purchase or time
apportionment. The one that is used depends on which is most advantageous but an election has to be submitted if you use one of the latter two.
All property disposals caught by the legislation
must be reported within 30 days of completion to avoid an automatic penalty. The disposal also has to be reported again on your annual tax return. Any tax due must also be paid within 30 days of the
sale completing.
You should never assume that what you consider
to be your main home in the UK, even if you have previously lived in it, will be free of UK CGT.
Nevertheless there are a number of planning
opportunities to safeguard your investment and capital gain.
Contact Us for more information or help with Tax Returns or CGT
reports.