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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.