Tax Return - House rented while abroad

blued

Help!!

I was in Australia from July 2011 - January 2012 and while I was away I rented out my house. Prior to leaving I filled out a form which I believed meant I should be exempt from paying tax on the rental income received.

A couple of months ago I received a letter from the tax office stating that I need to complete a return for 2011-2012. Despite referring to the notes I am finding it very difficult to complete this. I believe that along with my tax return I also need to complete form 'UK property' and form 'Residence, remittance basis etc'. Can anyone advise if this is correct?

Is there a step by step guide to completing these? The notes online are confusing and seem to be conflicting at times!

What happens if I submit the form and I have filled parts of it out incorrectly? Should I pay someone to do it for me and how much will this cost?

I had somewhat naive visions of it asking for the dates I was not resident in the UK and the amount of rental income received during that period!! That would be far too simple though...

N79

The UK property form is self explanatory - if you can't fill it in with the guidance notes then you need to employ a tax accountant.

The residency form is, I grant, somewhat complex and all the terms have very different meanings to their every day usage. Before worrying too much though - how long were you outside the UK exactly? More than or less than 6 months?

blued

I left the UK on 28/07/2011 and returned on 28/01/2012 so 6 months exactly!

If all I need on the property form is the number of properties and the total income from that property then that is no problem. I can't see any reason to include expenses such as insurance because I shouldn't be paying any tax to offset?

You are right the residence is causing the issues, I can tick yes to

3. Split year treatment
4. Was I resident in the UK for 2010-11
5. Was I ordinarily resident in the UK for 2010-11
6. Include date of arrival
7. Include date of departure
8. Did you work abroad before the date in box 6 or after the date in box 7
9. Have I come to live or remain here for 2 years or more

Then there is double taxation etc.

I'm also not sure if I should also be filling out an 'Employment' form because although it sounds from the notes like I should, I was PAYE before I left and straight back to PAYE when I returned (was on sabbatical).

It was an NRL1 I completed prior to going away.

So I need to fill out the 'Property' and 'Residence, remittance basis etc'. What about 'Employment'?

00ec25

You have misunderstood – when HMRC sends you a tax return you have to account for ALL your income for that entire tax year. That includes your employment income before, during and after your time in Aus. The fact the UK employment income was under PAYE means you have already paid tax on that BUT until HMRC have the total of all your income, including earnings in Aus and your rental income profit they cannot say if you have paid enough tax in total. (You are correct that you can claim a credit against your Aus earnings for the tax you paid on them whilst in Aus)

You really have not understood what the NRL1 does – you are not exempt , all it does is entitles you to receive the rent without 20% tax already deducted. By obtaining the NRL1 you have agreed that you will account for the tax due when you submit a tax return – hence you have now been sent one! Your reference to not needing to show any costs against the rental income clearly shows you really have no idea what you are doing – you are required to show the NET PROFIT from your rental – if you do what you say and simply show the gross income you will be charged far too much tax. If you don’t know how to calculate net profit (there are loads of posts on this forum and on the DirectGov basic guide here and HMRC's property manual here ) then get an accountant

FTBFun

If you're not out of the UK for a complete tax year, I'm afraid you have not broken UK tax residency and therefore that page is immaterial. I'm assuming you're a British national?

Thrugelmir

blued wrote: »

Help!!

I was in Australia from July 2011 - January 2012 and while I was away I rented out my house. Prior to leaving I filled out a form which I believed meant I should be exempt from paying tax on the rental income received.

The income is taxable somewhere. Either UK or Oz...........

tbs624

As 00ec25 says OP, you have not read the NR1 form correctly - it states clearly on the very first para on the front of the form

"About this form
You can use this form to apply to get your UK rental income paid without deduction of UK tax.......... This
doesn’t mean that the rent is exempt from UK tax, and we may ask you to fill in a UK Self Assessment tax return later"

Google HMRC's PIM ( Property Income Manual) for guidance on how to arrive at your net rental figure

00ec25

I assume you are a UK citizen who simply left the UK for a period of 6 months and you have returned home here with the intention of remaining here. For tax purpsoes therefore your never left the UK, you remain and have always remaiend tax resident here.

the fact you were in Aus for exactly 6 months (which is the timescale that drives where you are ordinarily resident) is, in your case, largely irrelevant.

In summary you are a UK tax resident and so owe tax on your worldwide earnings for 11/12 which you must account for by full disclosure of all income on your tax return, whether you owe any furtehr tax then depends on the bottom line total... but given it includes rental profit it is highly likley you do not have any UK personal allowannce left and so will end up with a tax bill.

Some of your tax has already been paid through PAYE, some of it has not (rental income) and in respect of your overseas earnings, you may either owe more or nothing depending on the relative tax rates and the details of the UK/Aus tax treaty

blued

Sorry for the delay, I didn't receive an email alert. OK safe to say I misunderstood what I was told about the NRL1. I am a British national and have returned to remain for now. To summarise what I need to do :

- I need to add all my PAYE to an Employee form
- I need to add the property earnings and work out NET profit using the means mentioned above to the Property form (am I right to say I can deduct letting fees, insurance and mortgage interest from my rental income?)
- Do I need to complete the Residence form or not? It states
Use the SA109 supplementary pages to declare your residence and domicile status and claim personal allowances as a non-UK resident when filing a tax return.
- I need to complete the Foreign form with Oz earnings. Is it likely I will have to pay tax on this? I earned about $30k and paid approx $7k tax on that.

Thanks for the help so far, I hope to set aside some time over the weekend to get stuck into this.

Sorry one more thing, is it correct I can't do this online? I did try before but read that I couldn't because I have income from property. Maybe I misunderstood?

FTBFun

blued wrote: »

Sorry for the delay, I didn't receive an email alert. OK safe to say I misunderstood what I was told about the NRL1. I am a British national and have returned to remain for now. To summarise what I need to do :

- I need to add all my PAYE to an Employee form YES
- I need to add the property earnings and work out NET profit using the means mentioned above to the Property form (am I right to say I can deduct letting fees, insurance and mortgage interest from my rental income?) YES, although make sure the insurance and mortgage interest only relates to the period of rental
- Do I need to complete the Residence form or not? It states
Use the SA109 supplementary pages to declare your residence and domicile status and claim personal allowances as a non-UK resident when filing a tax return. NO, as you remained UK tax resident so these pages are irrelevant
- I need to complete the Foreign form with Oz earnings. Is it likely I will have to pay tax on this? I earned about $30k and paid approx $7k tax on that. YES, you will have to include them, and possibly pay more tax if you are a higher rate taxpayer (the $7k on $30k is about 23%, enough to cover UK tax if you're a basic rate payer but not if higher).

Thanks for the help so far, I hope to set aside some time over the weekend to get stuck into this.

Sorry one more thing, is it correct I can't do this online? I did try before but read that I couldn't because I have income from property. Maybe I misunderstood?

You should be able to do this online. However you can still file a paper return if you'd prefer, which needs to be in by 31st October.

blued

Thanks FTBFun, I am a basic rate payer so hopefully there will not be extra to pay. I have found out that I can claim more than 50% of my Australian tax back so if I do have to pay extra that will hopefully more than cover it.