Non-resident Landlords Scheme (NRLS) taxes the UK rental income of people whose ‘usual place of abode’ is outside the UK.
Non-resident Landlords Scheme allows non-resident landlords to apply to HMRC for approval to receive rental income with no tax deducted. HMRC will give approval and register the landlord for self-assessment if their UK tax affairs are up to date or either:
- – they have never had any UK tax obligations
- – they do not expect to be liable for UK tax for the year in which the application is made
What is a non-resident landlord?
Non-resident landlords are people who have UK rental income and whose ‘usual place of abode’ is outside the UK.
For the purposes of the NRLS, landlords may include:
- – individuals
- – companies
- – trustees
- – partnerships
Each partner is treated as a separate landlord for their share of the rental income.
How non-resident landlords can apply for the Non-resident Landlords Scheme?
Most non-resident landlords who wish to receive their rental income with no tax deducted should apply for approval to HMRC.
Landlords whose tax affairs are dealt with by HMRC’s Public Departments 1 office should apply to their tax office. The addresses and telephone numbers are shown on the application form for individuals.
The application must be made on one of the following forms:
- – NRL1i – if the applicant is an individual
- – NRL2i – if the applicant is a company
- – NRL3i – if the applicant is a trustee (including a corporate trustee)
Non-resident landlords can apply to HMRC for approval to receive rental income with no tax deducted.
HMRC will give approval and register the landlord for self-assessment if:
- – their UK tax affairs are up to date
- – they have never had any UK tax obligations
- – they do not expect to be liable to UK tax for the tax year in which the application is made
When an application can be made under the Non-resident Landlords Scheme
If you’re leaving the UK to live abroad you should apply no more than 3 months before you leave the UK.
HMRC cannot consider an application before then. If your usual place of abode is already outside the UK you can apply immediately.
How to complete the application form for Non-resident Landlords Scheme
The following information supplements the explanatory notes.
Who can sign the application form for Non-resident Landlords Scheme
Downloaded application forms must be signed as follows:
- – form NRL1i must be signed by the non-resident landlord
- – form NRL2i must be signed by the company secretary or a duly-authorised officer of the company
- – form NRL3i must be signed by a trustee
Customers will need to verify their identity before completing the form.
Principal residential address: ‘care of’ and PO Box addresses
Some non-resident landlords may live in parts of the world where the only address they can provide is a ‘care of’ or ‘PO Box’ address. In these circumstances, HMRC will accept a correspondence address instead of a principal residential address.
Non-resident landlords should attach an explanation to the form of why they’ve not given a residential address. Other non-resident landlords may have a principal residential address that is not a postal address. In these circumstances, they should provide both the:
- – principal residential address
- – correspondence address
UK Tax Office, tax reference number and National Insurance number
Non-resident landlords should give details of their most recent UK tax reference number if known. Individual non-resident landlords should also give their National Insurance number if they have one.
Without this information, HMRC may not be able to process applications made on the basis that the non-resident landlord’s tax affairs are up to date. Where a non-resident landlord’s tax affairs have been dealt with in the past through a letting agent or tenant, the application should show, where known, the reference number for the letting agent or tenant.
Approval of applications under the Non-resident Landlords Scheme
HMRC will normally approve an application if:
- – the application form is complete and correct
- – it is satisfied that the non-resident landlord making the application will follow all their UK tax obligations
The approval does not mean the rental income is exempt from UK tax. While the rental income will be paid with no tax deducted, it is still liable to UK tax and the non-resident landlord must include it on any tax return.
HMRC will approve applications after an initial check. Applications will be checked later in more detail. Non-resident landlords may need to supply more information at a later date when the application is checked. Failure to provide extra information may result in the withdrawal of approval.
Who receives the notification of approval for Non-resident Landlords Scheme
HMRC will send a notice of approval to receive rental income without deduction of tax to either the:
- – non-resident landlord
- – non-resident landlord’s account or tax adviser where they hold written authority to do so
They’ll also send a separate notice to you if you’re named on the application form, authorising you to pay rental income to the non-resident landlord without deducting tax.
These notices will show an approval reference number.
All notices will give the date from when rental income should be paid without deducting tax. The date will usually be on the first day of the quarter when the landlord’s application is received.
Refusal of applications for approval under the Non-resident Landlords Scheme
HMRC may refuse an application from a non-resident landlord if it is not satisfied that the:
- – information given in the application is correct
- – non-resident landlord will follow their UK tax obligations
We will refuse an application by notice in writing. The notice will explain how the landlord can appeal against the refusal. Landlords should appeal in writing within 90 days of the date of the notice. If the appeal cannot be settled by agreement between both parties, an independent appeal tribunal will hear it.
Withdrawal of approval under the Non-resident Landlords Scheme
HMRC may withdraw approval from a landlord if:
- – it is no longer satisfied that the information given in the application is correct
- – it is no longer satisfied that the non-resident landlord will follow their UK tax obligations
- – the non-resident landlord fails to supply information requested by HMRC
If this happens, HMRC will:
- – send a notice to the landlord withdrawing approval, giving the reason for it and the date from when it is effective
- – tell you as the letting agent or tenant of the date from when you should start deducting tax from rental income
The notice will explain how the landlord can appeal against the withdrawal. Landlords should appeal in writing within 90 days of the date of the notice. If the appeal cannot be settled by agreement between both parties, an independent appeal tribunal will hear it.
Changes of letting agent or tenant
If HMRC has not been told about a change, the new letting agent or tenant will not hold a notice from them that lets them pay rent without deducting tax. In such cases, tax should be deducted from the rental income of a landlord that has valid approval.
If these circumstances apply after 31 March in any year, you as the letting agent or tenant should complete an annual return and provide a certificate showing the tax deducted.
If you receive a notice before 31 March and have deducted tax from the landlord’s rental income at any time since the previous 1 April, you can either:
- – contact HMRC to discuss the recovery of any tax deducted for the relevant quarters (recording transactions where any money is recovered and paid to the landlord)
- – agree with the landlord to issue a certificate after the end of the year to cover the tax deducted and to make no further deductions during the year
How can MCL Accountants help?
Contact MCL Accountants on 01702 593 029 if you would like us to assist you with any queries regarding the Non-resident Landlords Scheme or if you need any assistance with the preparation and submission of your business accounts and self-assessment tax returns to HMRC.
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Ishan provides financial management, taxation and transactional advice to business entities of all sizes. His expert areas include statutory compliance, business taxation, personal tax & transactional processing and systems. Industry sectors include professional services, retail, hospitality and entertaining & media and advertising services.