The Non-resident Landlords Scheme

(payment of rents to overseas landlords)

Background: 

The Non-resident Landlords Scheme (NRLS) is a scheme for taxing the UK rental income of non-resident landlords which is operated by HM Revenue and Customs (HMRC).  The NRLS requires UK letting agents to deduct Basic Rate tax from any rent they collect for non-resident landlords unless the agent has authority to pay the particular landlord their rental income gross (without deduction).

Non-resident landlords:

Non-resident landlords are persons (this term includes individuals, companies and trustees) who have UK rental income, and a “usual place of abode” outside the UK. Although the NRLS refers to ‘non-resident’ landlords, it is usual place of abode and not non-residence that determines whether a landlord is within the NRLS or not. In the case of individuals, HMRC regards an absence from the UK of 6 months or more as meaning that a person has a usual place of abode outside the UK.  It is therefore possible for a person to be resident in the UK yet, for the purposes of the NRLS, to have a usual place of abode outside the UK.

Applications to receive rent with no tax deducted:

Government guidance states that a landlord who is leaving the UK to live abroad should apply no more than 3 months before they leave the UK but if their usual place of abode is already outside the UK the non-resident landlord can apply immediately. In order to qualify for approval the following criteria must be met:

• the information in the application is correct; and
• the non-resident landlord will comply with their UK tax obligations.

Where the above criteria is met, approval will be given and the landlord will be registered for self-assessment if the non-resident landlord’s UK tax affairs are up to date, they have never had any UK tax obligations and they do not expect to be liable to UK tax for the tax year in which the application is made.

Refusal of approval

Where HMRC are not satisfied that the information in the application is correct or that the non-resident landlord will comply with their UK tax obligations, the application will be refused.