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HMRC nudges overseas landlords

HMRC is sending letters to overseas companies that own UK residential property and also to the occupiers of those homes, which is likely to cause a significant degree of alarm and confusion.

6th Sep 2019
Partner RSM UK
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Model house and vintage key

The landlord letters, on the face of it, are concerned with the annual tax on enveloped dwellings (ATED) and income tax on rental income.

Their purpose is said to be to help ensure the correct tax is paid in respect of these matters. However, the letters are confusing and the information requested is wide-ranging and well beyond what is required to satisfy their stated purposes.

The information requested potentially has much broader implications, such as benefits from occupation in the case of trust beneficiaries, inheritance tax (in respect of settlement of trusts) and even whether the source of the funds to acquire the property has been appropriately taxed.

It is not clear what work HMRC has undertaken to establish the degree of risk of non-compliance as opposed to embarking on a “fishing” expedition. Also, given that both landlord and tenant cannot be liable on the same rental income, HMRC’s two-pronged approach will inevitably inconvenience a recipient of the letter that has no additional tax to pay, because tax has either been appropriately withheld, or the landlord has registered and paid tax under the non-resident landlord (NRL) scheme.

What information is HMRC requesting?

Letter to occupier

This letter notifies the occupier that tax may need to be withheld from the rent and paid to HMRC by the tenant. It partly explains the circumstances when this will be required and how to register to pay the tax due. It also includes a form which requests the information below, much of which is not needed to ascertain the correct amount the occupier needs to withhold:

  • The full name and any previous names of the occupier, their national insurance number and UTR number, their date of birth, contact details and UK residence status
  • The date they moved into the property
  • Whether rent is paid, if not, why
  • To whom the rent is paid
  • The connection (if any) with the owner
  • Whether the property is owned by a trust. If so, the name of the trust, the trustees, settlors and beneficiaries, when and how the trust acquired the property, including when it was transferred if not purchased by the trust. The letter even suggests a copya trust. If ssssfis paid