Going overseas? Be careful of the taxman!

I took on a landlord from another agent recently who lived overseas, but had not advised HM Revenue and Customs (HMRC) of this. HMRC had taken £2600 from his rental income and weren’t for returning it! However there was no need for this to have happened, had the landlord and his agent registered properly in the first place.

What are the rules for overseas landlords?

When a landlord is not a UK taxpayer, the law says that an agent must deduct tax from rental income received, and pay this to HMRC. If they don’t do this, the agent is acting illegally. However a landlord can apply for a tax exemption certificate from HMRC which gives the agent permission to collect rent without deducting tax. This must be done in advance – it can’t be done retrospectively. It also works – we have about 20 overseas landlords in Northampton and we have an exemption certificate for each of them, so don’t need to deduct any tax.

As such we’ve been able to register the landlord in question for all future payments – we don’t need to deduct tax going forwards. However the tax already deducted has already gone – he wasn’t registered and there’s nothing that can be done about this. It’s hence really important that a non-UK landlord gets registered with HMRC prior to renting out his property, or financially there could be consequences. 

Richard