[Moorf]

Had a big bill in today from my managing agents. I am now being charged Non-Residents Landlord Tax @ 22% on my UK rental property.

Has anyone else had any dealings with this? I know that management agents have to do this as I've been out of the country for more than six months and this is my "Place of abode" as defined by the Inland Rev... and obviously I declared my income from the flat when we were in the UK - but I could put "expenses" against it in our returns (i.e. repairs, maintenance, new bathroom etc) which usually meant I ended up paying v. little tax on that income stream - can't see a way of doing that with the Non-Res Landlord tax :?

Any help/advice/experiences gratefully received.

Could really have done without receiving a big bill like that on a Friday :no :wah

[richard]

Not something I have had to deal with but can't you just fill in form NRL-1? I assume the double taxation rules should then cover your tax liability assuming you declare the income in NZ.

http://www.hmrc.gov.uk/nonresidents/fagnrl1_bw.shtml

[GeorgeM]

And if you can't stop Gordon and his chums from getting his hands on your 22% in the UK, presumably you could use the amount paid to reduce any tax liability you have in NZ?

[Graham Barnes]

It depends on how much rent you are getting.
If it is less than the personal allowance per year (about £4900 I think), you fill in the NRL-1 tax form which your estate agents should sign and send to the IR on your behalf. This allows them to pay you your rent without deducting tax. Otherwise, by law they must deduct tax, regardless of whether it is over your allowance or not.


Graham

[Moorf]

Yep, it's over the £5k mark.

So, I assume that the IR will somehow tie up the NRL Tax payments that the estate agents are making, with our tax returns that we do already? I don't remember giving any info to the estate agents in terms of my N.I or tax numbers - so I wonder how they are referencing it?

Obviously I am also asking these questions of my agency, except they're a bit slow in getting back to me - seems the reason that I had 100's of ££ taken out of this months rental £ is because they were audited a few weeks back and as I'm their only overseas landlord they hadn't done things correctly since March 05 and, consequently, muggins here gets slapped with March thru August tax deductions in one fell swoop. :wah

[jo b]

Helen

loads of people, family included kept asking me why don't you rent your house if you can't sell. The tax was the major reason we didn't

Jo

[wilson182]

We received a letter from the IR a few months back with an application form to apply to have our rent paid with no tax deducted. We received a reply saying that we can have the rent without tax deducted (which is what was happening anyway). We will probably get a tax return to fill in, but I think we will be under the personal allowance as the house has only been rented since October (assuming the year runs to April)

[Moorf]

Jo

I'd pay that tax anyway - in income tax - so it had already been "built into" the costs of running the rental etc for the last 10 yrs or so that we've rented it out. It's just that we have always done our own tax returns and the accountant offsets alot against the rental income - I think I'm just sore because ££ has been taken away from me without a) consulting me and b) asking what our tax position was in the first place.

For instance, I had a £4k bathroom fitted before we left for NZ - that, along with expenses, maintenance, repairs etc, negates any tax I should pay.....

Bloody I.R.....

[jo b]

Aye bloody I.R.

[A&R]

can someone please help me here.
As I am led to believe by my UK accountant under the double taxation agreement I can earn rent in the UK up to my personnal allowance before we get taxed and cannot get charged tax by NZ IR.

However on ringing NZ IR today it appears they will charge me tax on that rental income because the UK IR haven't!

Does anybody know which is right?

[ShakerMike]

A&R, you can generate tax free UK source income (letting, bank interest etc) up to the level of your personal allowance - but see the comments above about the NRL1 form to avoid tax at source on property letting.

In terms of the letting income, if the property is in joint names, you can split the income and have two PAs to go at. Don't forget you can also deduct agent's fees, repairs & maintenance, mortgage interest, insurance etc in arriving at the net profit - if you have a decent sized mortgage, in joint names, you'd generally be hard pressed to generate any profit, let alone a taxable amount above PA.

The NZ/UK tax treaty gives the UK the right to tax income from UK letting arising to a NZ resident. However, it does not dictate that NZ cannot tax it also - as a NZ tax resident, NZ taxes you on your worldwide income.

Article 7
Income From Immovable Property

(1) Income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.

(2) The term "immovable property" shall have the meaning which it has under the law of the Contracting State in which the property in question is situated. The term shall in any case include property accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of general law respecting landed property apply, usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources and other natural resources; ships, boats and aircraft shall not be regarded as immovable property.

(3) The provisions of paragraph (1) of this Article shall apply to income derived from the direct use, letting, or use in any other form of immovable property.
(4) The provisions of paragraphs (1) and (3) of this Article shall also apply to the income from immovable property of an enterprise and to income from immovable property used for the performance of independent personal services.


Effectively, to avoid double taxation, NZ would take the UK tax paid on the letting inome into account when quantifying the NZ liability (calculate full NZ liability on letting then give offset relief for any UK tax paid on the same income). However, NZ may have different rules on how you compile your letting account, and what is or isn't an allowable expense.

Hope that helps. If it confuses you more, drop me a PM

[boduke]

Having read this thread can someone just clarify - in English as this is not the language the tax office seem to speak!!
If our mortgage is in joint names and we complete a NRL-1 form providing that our rental income after expenses is less than our personal allowance we will not be liable for tax in the uk?
How does this work with regard to renting part way through the tax year. We are leaving for NZ in Jan just for a year so will keep our house, is it likely that we will have to pay some tax jan-april as we will have already used our tax allowance by working full time.

This whole tax thing confuses me no end and the tax office are not helpful beginning to wonder if our dream year out is worth the six month headache I've had and still 16weeks to go!! :

[ShakerMike]

If our mortgage is in joint names and we complete a NRL-1 form providing that our rental income after expenses is less than our personal allowance we will not be liable for tax in the uk?

YES, but see below


How does this work with regard to renting part way through the tax year. We are leaving for NZ in Jan just for a year so will keep our house, is it likely that we will have to pay some tax jan-april as we will have already used our tax allowance by working full time.

NOT QUITE SO SIMPLE - you will pay tax if you make a profit on the letting. In addition leaving for less than a full UK tax year means you will not break UK tax residence, and will therefore remain FULLY UK TAXABLE on your worldwide income. So if you plan to work in NZ, that income will also be UK taxable. A very warm welcome to the world of Double Tax Agreements boduke!

If you can, leave in Jan 06 and stay out until after April 07, that way, you'll get a complete UK tax year out and be treated as Not Resident from the date you leave in Jan. That will avoid unnecessary hassle in unravelling double tax on earnings

For more information, go here http://www.hmrc.gov.uk/leaflets/c9.htm and download the IR20 leaflet

[boduke]

Oh god I've now got that sinking feeling
To stay more than a year isn't possible. Thanks for your advice off to the tax office I think why are things so complicated

[katandbob]

ooooh I have a headache now, glad I am a poor skint Morgaged NZ wannabe, cause I couldnt be dealing with the Tax office as well as NZIS.

Good luck you guys in translating the rules into english!!

[Moorf]

I think I'd understand the rules better if they were in Chinese :o

[ShakerMike]

....which is why I'm in gainful employment ;)

Sorry if I've confused people. I'm just trying to pass on some basic free advice.

It's also partly why I'm selling my house! :roll

[Moorf]

It's also partly why I'm selling my flat!! Intended to keep it but I just can't be bothered with the tax / IR mularky - it's always been a 2nd property and I've waded through the tax for near on 15 yrs with it and it's just tooo much now we're here!

Very grateful for the information Shakermike - thanks :nice1 (do you happen to HAVE a Chinese version? :D )

[PaulandHelen]

Thank you shaker mike for your input, i'm just sitting here reading this thread thinking s@?!t i've got a house so has helen and we want to rent them out initially for a year until we decide on our future then keep them as a pension if we buy in NZ!
Why does everything have to so complicated?
P+H

[Wannaway]

Right, where do I start?
Firstly if you are a non resident landlord, like Moorf, you must inform the UK Revenue. You can then ask them if you may receive the rental income gross (ie without them deducting the basic rate of tax). To do this you must have a clean record of completing tax returns in the past on time etc and undertake to pay over any UK tax which may be due, ie still complete tax returns and perhaps be able to show that the erental income will be below the UK personal allowance. If for any reason they choose the Revenue say 'no' you must have witholding tax deducted. Your rental agent must by law do this otherwise it can fall on the tenant to withhold it. The agent should then pay over the witholding tax on a quarterly basis. The 22% tax is calculated on the gross ( not the net after expenses) BUT this is simply a cash flow point as your UK liability will still be calculated noramlly at the end of the tax year when you complete your UK tax return and any excess withholding tax deducted will be refunded to you. Similaly if you are granted aproval to receive your rents gross you will still need to calculate and pay over any UK tax in the normal manner. As your property is in the UK the witholding tax is simply a means to ensure the Revenue get their dues and you don't hop it and stop paying them.

When you come to complete your NZ tax liabilities I would suggest you employ someone here to do the necessary but basically you will get credit for the UK tax deducted ( the correct adjusted amount for the year which is payable in UK 31/1 after then end of the tax year).

Will reread the post to see if there were any aother queries.
Nicky