Overseas landlord = Tentant responsible for paying Tax on rent

booksurr

OP

on the basis you have not received a letter from HMRC informing you that the LL has been given permission by HMRC to receive rent gross with no tax deducted you are correct to be concerned.
http://www.hmrc.gov.uk/international/nr-landlords.htm#41
"What happens when approval is given?
When approval has been given, HMRC sends:
- a notice of approval to receive rent with no tax deducted to the non-resident landlord
- a separate notice to the letting agents or tenants named on the application form authorising them to pay rent to the non-resident landlord without deducting tax

Authority to pay rent to a non-resident landlord with no tax deducted is generally backdated to the beginning of the quarter in which HMRC receives the non-resident landlord's application. As the tax year for the NRL Scheme starts on 1 April, the quarters are the three-month periods that end on 30 June, 30 September, 31 December and 31 March. So if a non-resident landlord applies to HMRC on, say, 20 September, the authority HMRC send to his letting agent/tenant will usually take effect from 1 July"

HOWEVER, what you choose to do rather depends on your attitude to a) do you want to get evicted and /or b) do you think the LL should be allowed to get away with it . There is a good chance a) will follow b)!

That said I personally would certainly be writing to the LL seeking proof in the form of a letter from HMRC that he is authorised to collect gross rent but bearing in mind you do not know his circumstances and if he says he is a UK tax "resident *(place of abode)" you have no right to ask for proof of that as his tax affairs are none of your business in that context.

* LL does in fact appear to have a "usual place of abode" in Ireland rather than the UK so he must provide a UK address for you to serve notices at

Also bear in mind that if you go ahead and deduct 20% tax, you deduct it from the net profit not the gross rent, so it is your responsibility to allow for "reasonable" deductions that a LL would normally incur in calculating the taxable net profit
http://www.hmrc.gov.uk/international/nr-landlords.htm#41
"Deductible expenses
Letting agents or tenants must generally tax the rental income they pay to non-resident landlords unless HMRC has told them not to. In calculating the amount to tax, they take into account any 'deductible expenses' they pay in a quarter. These are expenses that they can reasonably be satisfied will be allowable expenses for the non-resident landlords when the profits of their rental businesses are computed.
Please see the Property Income Manual for advice on allowable expenses."

In other words you would be a fool to deduct tax, it is much much better to get the LL to register for the NRL scheme himself so he is entitled to gross rent receipts and working out his tax is his problem

fakiee

Thanks for the concise answer booksurr

G_M

There are two aspects

1) diplomatic.
Rock the boat too much and you might get a S21 Notice and end up house-hunting. Resolve amicably.

2) legal
a) As explained above, you could potentially have HMRC demand the LL's tax off you. So calculate 20% of all the rent you have paid so far, and withold all future rent till that amount is reached. Then re-start paying rent but witholding 20% each month.

Put all the money you withold to one side (seperate savings account). It is not your money! Be prepared to pay it either to HMRC or the LL if/when he verifies his tax position.

b) "I don't know the landlords address/residency however, his contact number has an Irish country code"
Without an address for the LL in England or Wales (not the UK), you do not have to pay any rent. Again, put it aside to pay if/when you are given a valid address

See Landlord and Tenant Act 1987 section 48

franklee

When this has come up before the tenant posting found the hmrc nrl helpline very useful. They understand the difficult position this puts the tenants in and should help to to resolve it by looking the landlord up to see if he is registered with them to receive the rent gross. If he isn't then you really ought to be deducting the tax, even at risk of a S21, as the bill is technically yours to pay. It may be the LL is paying the correct tax and the NRL helpline can put your mind at rest.

At least if you tip then off and they then write to the landlord the tenant doesn't have to risk the landlord's wrath by being the one to break the news. I'd ring the helpline to say I think the landlord lives in Ireland, explain why, but also explain you haven't been told he is non resident. If the tenant approaches the landlord directly he's likely to get told off.

If the tenant has told HMRC then there's less point in a retaliatory eviction as there won't be scope to avoid the tax with the next tenant if it's being avoided now. If the tax isn't being avoided there's no issue to no retaliatory eviction anyway.

I'd at the very least withhold the last 20% of rent due during the current fixed term until the matter is clarified.

franklee

booksurr wrote: »

Also bear in mind that if you go ahead and deduct 20% tax, you deduct it from the net profit not the gross rent, so it is your responsibility to allow for "reasonable" deductions that a LL would normally incur in calculating the taxable net profit
http://www.hmrc.gov.uk/international/nr-landlords.htm#41
"Deductible expenses
Letting agents or tenants must generally tax the rental income they pay to non-resident landlords unless HMRC has told them not to. In calculating the amount to tax, they take into account any 'deductible expenses' they pay in a quarter. These are expenses that they can reasonably be satisfied will be allowable expenses for the non-resident landlords when the profits of their rental businesses are computed.
Please see the Property Income Manual for advice on allowable expenses."

In other words you would be a fool to deduct tax, it is much much better to get the LL to register for the NRL scheme himself so he is entitled to gross rent receipts and working out his tax is his problem

It's not that difficult, read the more detailed paragraphs below the one you quote:

"less

• any deductible expenses that they paid in the quarter
• any deductible expenses that were paid away in the quarter at their direction by another person

It is the date letting agents/tenants actually receive/pay the rents (or pay the deductible expenses) that determines when they calculate tax."

Plus further down the page:

"Letting agents and tenants can deduct only those expenses which they pay or which are paid on their direction. This means they cannot deduct:

• expenses which the landlord pays, even if they have details of the expenses"

So the tenant deducts only the expenses they actually paid or directed when calculating the tax they do not have to guess anything about deductions that a LL would normally incur. The LL's own allowances and expenses will be dealt with when the landlord fills in his tax return at which point he may get a refund or even have to pay more tax depending on his overall affairs. The tenant isn't supposed to be an expert on the landlord's business. A tenant doesn't usually pay expenses (and if they did they will know what they were).

Hopefully what the NRL scheme does is, once the LL has been flagged to HMRC, encourage the LL to register and deal with his own tax rather than leave it to the tenant. So flag them up I say.

theEnd

booksurr wrote: »

if you based your comments on fact rather than ridiculous thinking then all you had to do to see if it is fact was to read the HMRC link quoted in #1

of course it is a real thing. It has been like this for many years

But has HMRC ever even tried to claim the LL's tax back from a tenant?

G_M

theEnd wrote: »

But has HMRC ever even tried to claim the LL's tax back from a tenant?

Should be easy to find out.

https://www.gov.uk/make-a-freedom-of-information-request/the-freedom-of-information-act