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Non resident with UK letting agents business

Taxable in the UK?

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I have a client who is based in South Africa who has a number of let properties in the UK.

His wife now has a small letting agent business in the UK acting as a lettings agent, in part for her husband’s properties, and in part for some 3rd parties, so it seem to be genuine. 

Generally a trade carried out in the UK is taxable in the UK.  In this case SOME of the trade is conducted whilst in SA and SOME in the UK which I think means at least part of the trade is taxable in the UK, (not looking forward to working that out, but probably falls under the personal allowance, for now)

Am I missing a rule around the fact this involves land and property based solely in the UK which makes all of the income taxable in the UK? If so, where should I be looking?  I think I might be getting confused with the VAT rules and possibly some wishful thinking on my part about not having to split it.

Looking at the DTA between the UK and SA, Article 6 deals with land and states "The provisions of paragraphs 1 and 3 [which say it may be taxable where the land is] of this Article shall also apply to the income from immovable property of an enterprise."  

Any suggestions?

Replies (9)

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By Anonymous.
12th Aug 2020 20:44

Very odd! Not the kind of work you would think was capable of being done from 6,000 miles away!

Is the first step identifying whether a "permanent establishment" exists?

https://www.gov.uk/hmrc-internal-manuals/international-manual/intm264050

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Replying to Anonymous.:
By ireallyshouldknowthisbut
13th Aug 2020 09:05

There is not one in a traditional sense.
Essentially the SA person is running it, and they have someone in the UK doing viewings on a self employed basis. They are pre screening potential tenants via facetime/zoom etc. They only customers I think are the husbands and some others in SA who have UK property in london. Same time zone of course helps.

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Replying to Anonymous.:
Ivor Windybottom
By Ivor Windybottom
13th Aug 2020 10:35

I am aware of letting agents that have closed offices locally to the lettings and then manage the process from another quite distant area. South Africa may not be Manchester, but it's the same principle.

As suggested, it seems to be a supply of services and for Income Tax it is having the UK permanent establishment that matters. For VAT the place of supply is likely to be related to the location of the land, so there may be UK VAT due if the fees are high enough.

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Replying to Ivor Windybottom:
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By Tax Dragon
13th Aug 2020 11:02

Ivor Windybottom wrote:

South Africa may not be Manchester.

My vote for quote of the day.

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Hallerud at Easter
By DJKL
13th Aug 2020 10:48

Who is physically signing the tenant leases might be an interesting question, is it the self employed UK based party on behalf of the various landlords?

We know the tenants must be within the UK, unless this is holiday lets, we know the "self employed" party does the viewings, so how are the leasing contract terms agreed and executed seems on point as of course maybe is the question, is this self employed UK based person really self employed?

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Replying to DJKL:
By ireallyshouldknowthisbut
13th Aug 2020 10:54

I haven't asked about signatures, I assumed there were all done via email but it would be in person in the UK.

I did ask about the person doing the viewing, and they act for a number of agents so I don't think that is an issue, they just get paid a fixed price per view and there are quite frankly not that many of them. Its a very small set up covering no more than a dozen properties, albeit 2 are HMO's.

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Replying to ireallyshouldknowthisbut:
Hallerud at Easter
By DJKL
13th Aug 2020 11:10

There is more to letting than viewings, there are inspections, inventories, complaints, repairs and replacements, legal compliance, debt enforcement etc, whilst one can pay people to do viewings what about the rest?

Someone is collecting monies, paying /accounting for tax re non resident landlords, doing the annual HMRC return re non resident landlords etc, dealing with tenant deposit schemes and their return, whilst a fair bit of this might be done from South Africa I am not convinced all of it can.

No idea in England but up here landlords are legally responsible for anti social tenants, so when the music is too loud and the neighbours cut up rough, who on the ground here is reading the riot act to the tenants, the one who does the house viewings (a scheduled activity) or is there someone else who gets out of bed at 3.00 am to deal with burst pipes/noisy tenants/leaking dishwashers?

(Apart from working for a property company I am also Company Secretary for a property agency, though these days we tend to steer away from residential letting though we do some block management)

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Replying to DJKL:
By ireallyshouldknowthisbut
13th Aug 2020 11:19

"quite" to all of the above.
Most of it is being done from SA, but "how well?" is another issue.
The whole thing came about due to paying 12-15% on top of the london rents and saying "we can do better than this ourselves"

Anyhow the commercial aspects are not really of my concern, although it may solve the issue if it doesn't last too long!

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Replying to ireallyshouldknowthisbut:
Hallerud at Easter
By DJKL
13th Aug 2020 11:30

They are your concern because they are part and parcel of considering the permanent establishment question within the UK, that is why I raised them, there will be other matters I have not even listed and someone in the UK may well be dealing with these.

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