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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.

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.

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.

The proposed withdrawal of the furnished holiday letting rules with effect from 6th April 2010 whereby lets were to be  treated in the same way as other let property, losing the tax advantages previously enjoyed eg treated as relevant earnings for pension purposes and losses being available to offset against other income, will not now go ahead. In the new Government's emergency Budget they have instead said they will announce revised plans in due course to take effect from 6th April 2011.

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% or 28% 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.