Q. My wife and I are moving to New York next month for the next two years and have decided to rent my Apartment out while we are gone. Having had a couple of letting Agents in to discuss the rental side with full management they have all mentioned the Non-resident Landlords Scheme with regards to income tax on earnings from the rental income. Apparently we have to fill out some paper work prior to leaving otherwise the Agent will have to deduct the tax prior to sending me my rent, is this correct? I have never heard of this before, surely it’s my responsibility to sort this out with the HMRC not the Agents?
A. Good question, and one that often hits non resident Landlords with a shock. In a nutshell, yes this is correct. The rules for the NRL Scheme came into effect on 1 December 1995. But the requirement to deduct tax under the Scheme applies to rental payments made on or after 6 April 1996. Where a husband and wife jointly own a UK property and both have their usual place of abode outside the UK, the NRL Scheme applies to both spouses and each is treated as a separate landlord in their own right. If the husband and wife both wish to receive the rental income with no tax deducted they must each complete a separate application form and send it to the Inland Revenue. If approval is given by the HMRC you will then be issued with an approval number which will also be sent to your letting agent, once the letting agent receives a copy of this he is able to release the rent collected in full to you as the Landlord. If an approval number is not granted due to you not fulfilling the criteria sited by the HMRC then the responsibility to collect tax lies with the letting agent. Letting agents are not required to calculate or pay tax on the rental income of a non-resident landlord if the Inland Revenue has told them in writing that the landlord is approved to receive the rental income with no tax deducted. Your Agent will give you an NRL1 form to fill out, this will need to be completed and returned to the Inland Revenue If an approval number is not issued the Agent will then have no choice but to deduct tax at source.