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bigduckontax
bigduckontax, Accountant
Category: UK Tax
Satisfied Customers: 683
Experience:  FCCA FCMA CGMA ACIS
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Both myself and my husband are non UK residents but we are

Customer Question

Both myself and my husband are non UK residents but we are British citizens. Our offer on a UK property has just been accepted. I have no property in the UK but my husband has one property which he rents for 675 pcm through an estate agent. Inland revenue have not sent him any self assessment forms - I assume because he is under his annual personal tax allowance. The property we are buying will rent for about 1000 pcm and service charges will be about 775 pcm. Is it better for me to buy this in my sole name or joint names for tax purposes? I presume it means we will have to fill in 2 separate NRL forms although the rental income will be mine. We may in a few years move back to Uk and sell this property - wouldwe then have topay capital gains on it - my husband will keep the house in his sole name.
Submitted: 8 months ago.
Category: UK Tax
Expert:  bigduckontax replied 8 months ago.
Hello, I'm Keith and happy to help you with your question.

The failure of HMRC to send out self assessment forms is common. My wife has a tax claim every year and despite completing the box that she needs a form next year they have to be chased to supply. Prodding letter No. 3 is about to go out!

It might be better to keep this house in your name to preclude any possibility of your husband coming into the basic band tax bracket. If you buy in joint names then the rental income would normally be split 50/50.

As regards XXXXX XXXXX Tax (CGT), yes, you might well be liable on the profit made on the sale. The following information is applicable:

In CGT your sole or main, note the 'or' not an 'and' has total exemption from CGT, but the house must have been owner occupied for the whole ownership period. Certain periods of absence are also exempted providing the property was occupied by you before and after these periods.

These are any period or periods which together do not exceed 3 years

Plus any period during which the owner performed all the duties of employment outside the UK

Plus any period not exceeding 4 years during which employment precluded occupation

Plus any period spent living in job related accommodation.

In addition the last 12 months of ownership is also excluded.

Furthermore if a dependent relative is accommodated rent free this is excluded.

One final point; are you or your husband British Citizens?
Customer: replied 8 months ago.

We are both UK citizens. The property will rent for about 1000 pcm and service charges will be 93 pcm so rental income of approx 900 pcm but my husband also has income of 675 pcm from his house which provides 603 pcm after estate agent fees. As he is not receiving SA forms I am concerned about starting it up and all the paper work involved for his tax as well as mine which will mean filling in 2 NRL forms - he has already filled in one for his house rental.

Expert:  bigduckontax replied 8 months ago.
Frankly I wouldn't worry except that at some future indeterminate date HMRC might wake up and send out self assessment forms in which case there will be a great deal of filling in needed. Remember you only have to enter data in the relevant boxes, the rest can be left blank which helps make a daunting form much easier!

Customer: replied 8 months ago.


I think I am obliged to fill in a non resident landlord form if I rent in the UK, my husband filled one in for his house which is in his sole name and rents through an estate agent. My concern is that if the new property we buy property is in joint names we will have to fill in 2 NRL forms and then my husband will have to declare both properties and will be over his personal tax allowance. The new property will be rented privately not via an estate agent. Are we obliged to fill in a NRL. I spoke to HMRC and they said I was otherwise the tenant was required to withhold the tax.

Expert:  bigduckontax replied 8 months ago.
Er, no! According to HMRC's advice NRL forms are completed by letting agents or tenants. On receipt of these the tenant or the letting agent will be advised whether or not income tax should be deducted at source from the rent and paid direct to HMRC. I am at a slight loss as to the thrust of your question.

It would appear that a NRL form would in any event be required for each and every property rented.
Expert:  bigduckontax replied 8 months ago.
Here is HMRC's guidance on NRL forms:

1.2 Letting agents of a non-resident landlord must:

 deduct tax from the landlord’s UK rental income; and

 pay the tax to HMRC’s Accounts Office, Shipley (see
paragraph 1.16 below).

1.3 Where there is no letting agent, tenants who pay rent of more
than £100 a week to a non-resident landlord must:

 deduct tax from the landlord’s UK rental income; and

 pay the tax to HMRC’s Accounts Office, Shipley (see
paragraph 1.16 below).

Tenants who pay rent of £100 a week or less do not have to
operate the scheme unless they are told to do so by HMRC (see
Chapter 6 below).
Customer: replied 8 months ago.


When I spoke to HMRC they said it was my responsibility to fill in a NRL. It is doubtful a tenant would know they had to deduct tax

Expert:  bigduckontax replied 8 months ago.
Well, that's not what their web site says and it would appear to be the duty of the tenant in certain circumstances to deduct tax and pay same directly to HMRC. It is not unknown for HMRC to be sketchy on details until you work up through the hierarchy.

I do appreciate though that probably most tenants are blissfully unaware of their responsibilities in and many case quite incapable of carrying them out leaving it to the landlord to do the split. That's assuming, of course, that the landlord can extract the rent in the first place!
Customer: replied 8 months ago.

So should we just rent it out and see if the tenant raises it?

Expert:  bigduckontax replied 8 months ago.
Frankly, knowing the furore that the failure to complete the form would cause I suspect that as you are not intending to use a letting agent you had better fill one in yourself. My own inclination would to be to ask HMRC on what authority they think you, as opposed to the tenant, should complete one and then watch them wriggle!

In any event, as you realise, there will have to somewhere be a form for each property rented. I would push the letting agent as to why he wasn't completing the form; after all that's one of the things his fees are supposed to cover.
Customer: replied 8 months ago.


The letting agent has completed the form so all is straight with that property. The new property will be rented privately - I have 2 concerns


'1 - in joint names we will have to fill in another 2 NRL forms. With approx. 500 form the 50/50 of the rent of the new property plus 603 from his sole property it will put my husband over his personal tax allowance.


2-If my husband owns one property in his sole name and another in joint names when he sells one of them will he be liable for CGT if we return to the UK or remain abroad?


 


 

Expert:  bigduckontax replied 8 months ago.
That is why I suggested single ownership of the second property to reduce both CGT and Income Tax liability.

In any event both properties will be assessed for CGT on sale as I explained in the beginning.
Customer: replied 8 months ago.


Could we buy the property in joint names and then claim I am the sole recipient of the rental income to save my husband filling in tax forms?

Expert:  bigduckontax replied 8 months ago.
No, sorry.

You could buy as a Tenancy in Common both holding different proportions of the property, but it really isn't a good idea. In joint names, technically a Joint Tenancy, in the event of the demise of one party the other inherits automatically. In a Tenancy in common each holder can sell their share to a third party.
Customer: replied 8 months ago.


I think it may be best to buy in my name to save extra paperwork. If I fill in a NRL will HMRC automatically start sending me tax returns?

Expert:  bigduckontax replied 8 months ago.
They might, or they might not. HMRC are notoriously fickle in their activities. You do have your own personal allowance and if the annual rental less outgoings don't breach that limit they may well not bother at all. aotherwise you will have to ask to Self Assess.
Customer: replied 8 months ago.

I think the personal allowance for 2014 - 15 will be 10,000 is that correct?

Expert:  bigduckontax replied 8 months ago.
That is the long term plan of the current government and it has at last reached fruition.
bigduckontax, Accountant
Category: UK Tax
Satisfied Customers: 683
Experience: FCCA FCMA CGMA ACIS
bigduckontax and 3 other UK Tax Specialists are ready to help you
Customer: replied 7 months ago.


I am thinking about buying the property as a short term investment as I have heard property prices are rising. I intend to sell in about 12 months and intend to remain in Bahrain. I heard non residents are not liable to CGT, I called HMRC today but they cannot give me information and directed me to help sheet 278, which did not help. Will I have to pay CGT and if so how much? This will determine if I buy or not?

Expert:  bigduckontax replied 7 months ago.
You are a British Citizen and the property is in the UK so if you don't live in it you will be subject to CGT on the sale. I am snowed under elsewhere at present and will double check, but I'm almost sure!
Customer: replied 7 months ago.

Please double check - I heard non residents did not have to pay CGT and need to know rules before I buy -thanks.

Expert:  bigduckontax replied 7 months ago.
Yes, well only true in part. The rule is:

Tax on capital gains from assets in the UK

If you're not resident in the UK, whether you pay Capital Gains Tax on UK assets will depend on a number of factors:

If you have previously lived in the UK, and if so, when you left the UK, the period of time you were resident in the UK before your departure and the length of time you live abroad

Whether you are still ordinarily resident in the UK - that is, your normal home is the UK

Whether the assets are held for the purpose of carrying out work through a UK branch or agency
Customer: replied 7 months ago.

I have not lived in Uk since 1997 and until then I was resident for 37 years. I am not ordinarily resident in Uk - I am completely non resident.

Expert:  bigduckontax replied 7 months ago.
Under those circumstances you might well not be liable to CGT, but you could well have a battle on your hands if the gain exceeds the annual limit. HMRC don't like gains on trades in houses in which you have never lived!

If you sell within the 12 months of course, you might escape as the last year of ownership is ignored for CGT purposes.
Customer: replied 7 months ago.

Difficult to understand what to do. If I do not declare non residency rental income (as it is duty of tenant to do this - who is likely not to know the rules) and then sell - what would be my CGT liability.

Expert:  bigduckontax replied 7 months ago.
Depends on the gain over the limit if any, if any. Can you give me a steer?
Customer: replied 7 months ago.

If I just buy and rent through my son, the tenant will know I am living abroad but not likely to understand their duty to withhold 20% tax. Should I then sell after 12 - 18 months would HMRC investigate this - do they keep records of UK property bought and sold quickly?

Expert:  bigduckontax replied 7 months ago.
They are sure to check as the Land Registry advises them of the transfers of property and the stamp duty will indicate the price
Customer: replied 7 months ago.

Seems like a minefield and sales letter have already gone out - not sure what to do about buying it now?

Expert:  bigduckontax replied 7 months ago.
Minefield is the right description for CGT especially for houses you don't live in even if they are your sole or main domestic residence.

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