Income from letting UK property is subject to UK income tax even if the landlord is resident abroad.
We recommend you have an accountant to deal with your taxation affairs in the UK and that you provide us with his name and address. With effect from 6 April 1996 under the Inland Revenue's new Self-Assessment Rules, overseas landlords' tax treatment changes. Under the Taxation of Income from Land (Non-Residents) Regulations 1995, the rent-receiving agent (or where there is no agent, the tenant) will be required to deduct 25% tax from the rent (after taking deductible expenses paid out into account) and to pay the tax to the revenue each quarter. However, the overseas landlord can apply to the Revenue for exemption from this requirement. Provided his tax history is good and his tax affairs are up-to-date, the overseas landlord will be issued with a certificate, with a copy sent to his rent-receiving agent. This will authorise the agent to pay his rent to his landlord without deduction of tax.
The necessary application forms for this purpose can be obtained online and these should be completed once we are instructed to act for you, and returned to the Inland Revenue FICO Office in Bootle, Lancashire, with a copy to ourselves. Neither your rent-receiving agent nor your tax adviser can file this application on your behalf - it must be done by you. Failure to return the form at the earliest opportunity may result in the exemption certificate not being issued early enough, in which event, we would have no alternative but to make the 25% tax deduction before remitting rents to you. Where we have to retain from the rent to cover the tax liability, it should be noted that we cannot undertake clients' tax computations or agree/dispute assessments on your behalf. We will liase with your accountants who should agree the tax due with the Inland Revenue. We will remit the tax demanded and your accountant should re-claim any overpayment that is subsequently agreed. We will account to you for any surplus of funds. Any interest earned on monies retained will be used to offset the additional administration costs involved with non-UK resident landlords.