Overseas Landlords and UK Property

Many people overseas purchase properties in the UK to rent out, capitalising on rising
UK real estate prices whilst benefiting from the rental yields. The UK will tax the rental
profit arising from any property situated in the UK, regardless of the residence of the
owner or the tax treatment in the country of residence.

Profit is calculated as rental income less any allowable
deductions, such as maintenance and repair costs, mortgage
interest, letting agent or management fees.
In addition, a “wear and tear” allowance of 10% of the rental
income is allowable as a deduction for properties which are let
fully furnished.
Tax is charged at 20% on profit up to £31,865 (2014/15),
40% between £31,866 and £150,000 and then 45% thereafter.
Certain individuals may also be able to claim the personal
allowance of £10,000.
For any landlord who is not UK resident, the UK tax authorities
will impose a withholding tax of 20% on rental income, applied
by the letting agent or in some cases the tenant.
Non-resident Landlord Scheme
To avoid the negative cash-flow effects of the withholding tax, a
landlord may be able to register under the Non-resident
Landlord Scheme (NRL scheme).
If approval is granted, no withholding tax is applied and rental
income is paid gross to the landlord.
This does not exempt the rental income from UK tax, but does
help with cash-flow. A non-resident landlord will still need to
complete UK tax returns and pay tax as normal at the year end.
Non-resident Landlord Company
It is possible for overseas persons to own UK properties through
a non-UK resident company. This has several benefits, including:
• Maximum income tax rate of 20% on the rental profit;
• Inheritance tax protection on the value of the UK property;
and
• No UK capital gains tax on sale of the company shares.
If residential property is to be held through a company,
consideration should be given to the rules concerning corporate
enveloping of UK residential property, known as the ‘Annual Tax
on Enveloped Dwellings’. If the company is renting the property
to an unconnected party, there should not be any applicable tax
payable but an annual return would need to be filed to claim the
relevant relief.

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Commercial Property
There are additional considerations where commercial property
is purchased, including whether capital allowances for integral
features / plant and machinery can be claimed, and the format
of any lease agreement. VAT will also be a consideration when
acquiring commercial property.
We can also advise on the most appropriate ownership structure
to hold the property, whether that is personally, in a company or
through a trust. The UK tax rules in this area are complex and
care must be taken to ensure efficient income tax structuring on
the rental profit does not prejudice capital taxes, such as capital
gains tax, stamp duty land tax and inheritance tax.

Blick Rothenberg Services

We act for a number of clients who are not resident in the UK but
let out UK property. We assist in the completion of the relevant
forms to register the owner for the NRL scheme to prevent
withholding tax and also complete the UK tax returns to report the
income in a timely manner and claim all allowable costs.

For more information, please contact:

Blick Rothenberg LLP
Bob Rothenberg 16 Great Queen Street
Senior Partner Covent Garden
Tel: +44 (0)20 7544 8888 London WC2B 5AH
Email: bob.rothenberg@blickrothenberg.com
Tel: +44 (0)20 7486 0111
Nimesh Shah Fax: +44 (0)20 7935 6852
Partner Email: email@blickrothenberg.com
Tel: +44 (0)20 7544 8746
Email: nimesh.shah@blickrothenberg.com www.blickrothenberg.com

Blick Rothenberg LLP is authorised and regulated by the

Financial Conduct Authority to carry on investment business.