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Buy to let investment

Non UK resident landlords

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There are a large number of landlords who own property in this country yet who are not resident in the UK. That means that they spend at least 9 months of the year abroad. There are special taxation circumstances affecting those landlords who fall into this bracket.

Under the 1995 Finance Act, the letting agent is obliged to advise the Inland Revenue that a letting has been arranged for a landlord who is non resident for UK tax purposes. Lettings agents usually take responsibility for the payment of any tax that arises from the letting and will retain enough funds to cover this liability.

Non resident landlords can apply to the inland revenue to receive gross income from rental property. This is called an "authority to receive rent gross of tax" letter, also known as an exemption certificate. If this is granted the Inland Revenue will issue you and/or the letting agent with an 'approval number'. If this is granted, then the lettings agent is allowed to pay your rental income with no tax deducted.

Obviously, receiving your income without tax deducted provides you with a considerable cashflow benefit, as you will not have to pay your tax until the end of the financial year. Please note that this certificate does not grant you an exemption from tax, but approval to deal with your own assessment.

If the exemption certificate has not been issued then the lettings agent is obliged to withhold tax at the standard rate and must pay these funds to the Inland Revenue on a quarterly basis. Your managing agent will normally do the accounting for you, deducting and withholding tax at the current basic rate from net rent after allowable expenses. If the tax payments you make end up being greater than your liability (for instance, if there are deductible expenses which are not immediately accounted for) they may be claimed back by the landlord at the end of the year. It will be your responsibility to liase with the Inland Revenue to arrange this and not the responsibility of the managing agent.

You can apply for the exemption certificate from the Inland Revenue at:

FICO (non-residents)
St Johns House
Merton Road
L69 9BB

Tel: 01351 472 6208 / 6209

You need to request form:

  • NRL1 if you are an individual
  • NRL2 if you are a trust
  • NRL1 if you are a company

You can also acquire the forms from the Inland Revenue website:

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