Obligation to lodge a UK tax return - Non residents with UK rental income

Obligation to lodge a UK tax return - Non...

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The question of when a non resident individual in receipt of UK rental income is required to lodge a UK tax return appears to be a moving narrative.

The content of the HMRC website - now the .gov.uk site - appears to indicate that registration in the SA system and the resulting requirement to lodge a UK tax return annually is necessary where an individual (whether resident or non resident) is in receipt of rental income:

> Of at least £10k on a gross basis

> Of at least £2,500 after deducting allowable expenses.

Where do these numbers come from? 

Is there any legislative basis for them?

The questionnaire on the .gov.uk website discussing whether or not a UK SA return is needed then goes on to seemingly require a tax return if you have lived or worked abroad, and have any income in the UK.

We are based in Australia and have many clients (ex-UK and returned Australians) with UK property income, many of whom derive net rentals less than the UK personal allowance.  Pending the contemplated withdrawal of the UK PA for non residents is there in fact a legislated requirement for these individuals to seek a UTR and to lodge UK tax returns each year?

The thoughts of fellow Accounting Web participants will be greatly appreciated!

Replies (16)

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By Paul D Utherone
24th Feb 2015 07:18

Q: Is there a legislative basis?

A: No

Those are numbers put up by HMRC and have no basis in law.

You are aware, presumably, of the Non Resident Landlord scheme? https://www.gov.uk/personal-tax/non-resident-landlord-scheme

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By Marion Hayes
24th Feb 2015 08:09

Different systems

The law in the UK by definition applies to UK taxpayers, but the Non-resident Landlord scheme puts the onus on the letting agent or tenant to deduct tax at source before sending net rents to the Landlord. They are the people who will be pursued if HMRC discover unreported/untaxed income.

This means that it is in the non-residents interest to register with HMRC as they would not otherwise get relief for expenses. It does not automatically follow that annual returns are required as the NRL office is very realistic with agreeing periodic reviews to ensure there is still no liability.

However, a word of caution - the rules here are very different to yours in assessing the taxable income - I had many discussions in the past where the situation was reversed and UK client had Australian rental income. They were nearly always told there was a loss but for UK purposes there was actually income. Our treatment of capital items differs to yours - or it did.

My suggestion would be you make an arrangement with a UK accountant to cast a quick look at each property account to ensure you are looking at the right amount of taxable income to start with. I am sure it would not be cost prohibitive as they would rely on your analysis. 

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By Xi Ng
24th Feb 2015 10:27

If any of your clients are directors of a UK company, there is a legal requirement to file a tax return. That is on the HMRC website.

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Replying to Duggimon:
By Paul D Utherone
24th Feb 2015 11:05

Really? Is that so?

Xi Ng wrote:

If any of your clients are directors of a UK company, there is a legal requirement to file a tax return. That is on the HMRC website.


 Perhaps you'd like to give us a reference to such a legal requirement for directors? Then again this ran&ran recently didn't it :)
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Replying to Tom 7000:
Stepurhan
By stepurhan
24th Feb 2015 11:27

Not legislation

Xi Ng wrote:
It is here: https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return

That is HMRC guidance. HMRC guidance is not legislation. As has been said over and over again on this site, HMRC guidance does not always agree with the legislation. This is just one instance of that.

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By JamesAnd
24th Feb 2015 11:40

Not this again!

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Replying to Mr Hankey:
By Paul D Utherone
24th Feb 2015 11:46

:D

JamesAnd wrote:

Not this again!


 ... are you getting flashbacks ;)
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By JamesAnd
24th Feb 2015 11:51

Bloody horror movie!!

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By Xi Ng
24th Feb 2015 12:07

Hook,

Hokk, line, and sinker! :)

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Replying to Matrix:
By Paul D Utherone
24th Feb 2015 13:14

DOH!!

Xi Ng wrote:

Hokk, line, and sinker! :)

... another member for whom an Irony Meter is required when reading their responses :p
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Replying to Matrix:
Stepurhan
By stepurhan
24th Feb 2015 14:14

Too plausible

Xi Ng wrote:
Hokk, line, and sinker! :)
The problem is so many people have said exactly the same thing before in all seriousness. As a result it is a joke that has long lost its humour for me.

Of course, as it was your first ever post, you have left yourself open to assertions you originally meant it seriously and are now back-pedalling. Better establish a reputation for actually knowing your stuff before it's too late. ;-)

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By nogammonsinanundoubledgame
24th Feb 2015 12:20

Nice one Xi Ng

Diary note for 01 April.  Directors requirement for tax returns.

:)

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By JamesAnd
24th Feb 2015 12:27

Damn - does that mean we are capping this string at only 11? It was well in to 60 I believe last time - must surely be able to beat that!

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Alan_C
By [email protected]
25th Feb 2015 00:32

Thanks for responses.

I am aware of the NRL scheme - I am a UK qualified CA (a member since 1989, and was in practice in England for 8 years before I moved to Victoria), as well as being qualified in Australia!

What I am taking from the absence of any reference to legislation is the fact that HMRC only brings individuals into the SA regime by virtue of the individual entering into the NRL scheme.

If HMRC overlooks this - and in the past there were many taxpayers who appear to have not been entered into SA in spite of being approved under the NRL scheme -  there is no requirement to enter into SA, so long as the annual taxable amount in the UK (after deducting expenses as permitted under UK provisions) is less than the personal allowance to which the non-resident may (or may not) be entitled.

Best regards..

 

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By Marion Hayes
25th Feb 2015 11:18

Order of events

Legislation applies to the UK Letting Agent or Tenant. They must tax at source unless HMRC tells them not to. (unless tenant pays less than £100 p week direct to Landlord. )

HMRC only authorise gross if Landlord applies.

Depending on details of application HMRC decide whether to include in SA or not. It is not a matter of overlooking as I said before.

Landlords are expected to self assess each year to make sure still no liability - that does not mean anything other than a calculation.

So if they have been given gross status and income stays below limits nothing further need be done.

Letting agents will continue to declare gross rents to HMRC each year so if it looks as if there may be a liability HMRC will withdraw gross status and the circle begins again  

 

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