All landlords that live outside of the United Kingdom for six months of the year or more are considered to be a non resident landlord and you must remember the HMRC makes it your responsibility to notify them of the tax you owe, if any, on your property investment income.
The NRL scheme was created in 1996 and requires letting agents to deduct tax from rental income on behalf of the landlord unless the landlord has approval from the scheme to be paid the rent income in full.
For landlords that do not use a letting agent, the tenants are responsible for deducting the tax if their rent exceeds one hundred pounds per week. If the rent is less than one hundred pound per week the tenants are not required to take part in the scheme.
For properties that are owned jointly it will still fall under the scheme if one or more of the owners lives outside the United Kingdom and each owner must submit an individual application to join the scheme (the same way as our taxes are treated individually).
The purpose of the scheme is to ensure that rental income tax is collected while the burden of a landlord attempting to file taxes from outside of the UK is lessened.
If an application to bypass the automatic deductions is successful this does not mean a landlord is exempt from paying income tax. It just indicates that the landlord is responsible to pay HMRC any due taxes.
Usually submitting an annual self assessment tax return with the property and rental income sections accurately filled can establish the correct amounts that are due the the HMRC by the landlord.
Estate agents that have collected taxes previously will be written to by the HMRC to confirm that the rent can be paid in full to the landlord once accepted on the NRL scheme. Any landlords that are unsuccessful will receive a reason for refusal, but it can be appealed.
Employing a tax consultant may be a good route to go down for landlords taking part in the scheme. However an ARLA accredited agent such as Fishneedwater can advise landlords on the necessary steps to take to ensure that everything is done correctly.
HMRC are currently putting into place systems designed to recover owed taxes by UK landlords, so following the scheme correctly and submitting accurate tax assessment forms is of utmost importance for landlords.