Andrew Baker - Taxation Consultant - Non-Resident Landlords & Tax

	Andrew Baker - Taxation Consultant
	A UK tax service for Non-Resident Landlords, Pilots, Aircrew, Seafarers and Non-Doms - UK tax advice for residents worldwide

Non-Resident Landlords & Tax

Overseas Landlords and the Non-Resident Landlord Scheme

If you decide to let your UK property while you are overseas, it will be necessary for you to keep records of the rental income and expenditure to demonstrate whether you have made a profit or a loss. Any profit will be taxable, subject to the availability of claiming personal allowances, whereas losses can be carried forward and offset against rental profits in future years.

For property let on a fully furnished basis an annual 10% wear and tear allowance can be claimed for furnishings which is generally more advantageous than claiming for replacement items as and when they arise. The initial purchase of furniture cannot be claimed.

Bank statements, letting agent statements, invoices and receipts should be kept in support of the figures in case HM Revenue & Customs (HMRC) request sight of them as evidence.

The rent-a-room allowance of £4250 (£2125 each for a couple owning the property jointly) is only available if you reside in the property where rooms are let out. Therefore this allowance is not available to those who are non-resident and living overseas.

This is however a useful allowance to claim for individual who qualify, particularly those living in London who are looking to rent out rooms in their house during the 2012 Olympics. This will save the need to retain receipts and claim expenses when completing their tax return, provided it is more tax advantageous to do so.

With effect from 6th April 2012, for a letting in the UK or an EEA country to qualify as a furnished holiday let, whereby the profits qualify as net relevant earnings for pension purposes etc, the property has to be available for letting for 210 days in the relevant period (previously 140 days) and actually let for 105 days in the relevant period (previously 70 days).

Longer periods of occupation ie longer than 31 continuous day must not exceed 155 in total during the relevant period otherwise it will be treated in the same way as any other furnished let property.

Already effective from 6th April 2011, losses from furnished holiday lets can now only be offset against profits from the same furnished holiday let business (previously losses could be offset against other general income).

If you let your property through a letting agent or directly to the tenant at a rate of more than £100 per week, as an expatriate landlord, 20% basic rate tax will be deducted and paid to HMRC. Although credit can be claimed for this on your self assessment tax return, it is advisable to apply under the Non-Resident Landlord Scheme for an approval certificate so that the rent can be paid to you without this deduction. This helps with cash flow and enables you to claim expenses, such as mortgage interest, in your letting accounts, of which your agent or tenant would not necessarily be aware.
The handling of the non-resident landlord approval applications, together with the preparation of annual letting accounts and self assessment tax returns is a service I would be delighted to provide for you.

Capital Gains Tax
Generally, it is necessary to be non-resident for 5 tax years before capital gains tax exemption can be claimed. Therefore, if you sell your property whilst overseas but return to the UK within 5 years, capital gains tax at a rate of 18% and/or 28% depending on your liability as a higher rate tax payer, could be payable upon your return, subject to the availability of claiming your annual capital gains exemption.
This could apply to property which is your only home in the UK whether or not you have ever lived in it. However, there are certain exemptions and reliefs available, dependent upon your circumstances for residing abroad and whether you have lived in the UK property as your main residence at some stage during ownership.
Relief for the qualifying periods where you have lived in the property and where it has been let, is calculated by time apportionment of the capital gain. Consequently, depending on how long you have owned the property, it is possible that part of the gain could remain exposed.
I would be pleased to look at your particular circumstances and prepare draft capital gains tax calculations in advance of the sale of your property. I can also provide advice on minimising your capital gains tax liabilities, where possible, which can be included as part of a personal in depth written report leading up to your permanent return to the UK.