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Non Resident Landlord Tax

Non Resident Landlord Tax

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I have a client who lets a shop/flat property. Last Autumn she went abroad and I advised HMRC and I know they have registered the tenant on the scheme. The tenant is a poor payer but has made some payments to my client.

Needless to say my client has not received the required paperwork from the tenant so has no evidence of tax paid. So who is responsible for the missing tax? Can we assume that the payments received are 80% or do we assume they are 100%?

Ultimately the tenancy finished last week - I went with the landlord who was visiting the UK to re-possess the property and would normally make a judgement on the rent that will actually be paid and what is not likely to come in. Obviously the deposit will be retained but wont cover the whole balance. 

The question (at least in my mind) is important not because my client doesn't want to pay tax; but as it determines the total rent paid and the amount assessable/ with an appropriate bad debt adjustment.

Obviously if HMRC chase the tax due (which their guidance says they will) and my client's calculation is based on the net amount there will be more income in future years but as my client will be entitled to PA for 2014/15 but not after that they would be penalised if HMRC collect tax in a later year which reduces the bad debt

Or am I over complicating something?



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By taxguru
28th Jul 2015 08:22

From what I understand the situation is as follows:

- NRLS applies to the client

- Tenant failed to operate the scheme: failed to pay the tax over to HMRC, and failed to issue a certificate of tax (Reg 12)

And, my view on this is as follows:

1. Income from property business(being a trade s.272 ITTOIA/05) is computed on accrual basis. However, if the income is below £15,000 HMRC accept computations based on cash basis (PIM1101). So if the income is below £15,000 the client could compute the income on cash basis.

2. Whilst the landlord cannot claim tax credit since the tenant failed to operate, Reg 2says if the tenant retained the tax to be paid to HMRC then the landlord could set it off against tax payable.

3. For failure to operate the scheme penalties may apply under s.98 TMA/70 on the tenant. 


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By paras007
28th Jul 2015 09:36

I'm not sure I understand

OP - You say you advised HMRC. What exactly did you advise and did you not make an application to be eligible to receive rents gross rather than after deduction of tax? Why not?

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By Portia Nina Levin
28th Jul 2015 10:31

Let's start with
How much was the rent that the tenant should have paid (before any deduction of tax)? Was it more than (the equivalent of) £100 per week?

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