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Off-shore Landlords

Friday, 26th July, 2013

Expats who own rental property back in the UK, or who recently sold a second property here, are being warned to get up-to-date with their tax liabilities or face the possibility of heavy consequences.


The UK Tax Office is ramping up efforts to sniff out private landlords who evade tax due on rental income from the sale of buy-to-let property. Since 2011, HMRC has launched 40 specialist taskforces to target tax cheats in the buy-to-let sector.


In Yorkshire alone this has led to 12 cases of landlords being criminally investigated. Meanwhile, the South East taskforce, launched in November 2012, expects to recover 4 million in unpaid tax. Recent reports show that an increasing number of new developments in London are bought by expats wanting the security of a buy-to-let back in the UK.


The good news is, as part of HMRC's "Property Sales Campaign", investors have until 6th September this year to voluntarily disclose and pay any unpaid tax resulting from the sale of a second home. Once this deadline passes, tax experts expect an aggressive attack on undeclared rental income.


It's not surprising that HMRC now sees private landlords, wherever they might live in the world, as a major source of tax revenue. Recent research by a London accountancy firm showed that buy-to-let landlords paid 2.02 billion in income tax on their rental income in 2010-11, up 13% from 1.78 billion the year before. It also revealed that the number of Britons with direct investments in let property increased from 1.8 million in 2009-10 to 1.9 million in 2010-11.


There is concern that many expat landlords might not fully comprehend their tax reporting obligations in the UK. Of course, depending on an individual's personal circumstances, their tax liability might be negligible and often they will have deductible expenses.


Measures to minimise lost rental revenue are already in place. The Non-Resident Landlord Scheme (NRLS) requires UK letting agents to deduct basic rate tax (20%) from any rent they collect. And if the non-resident landlord does not have an agent acting for him/her, and the rent surpasses a minimum amount, then their tenants must deduct the basic rate tax themselves.


HMRC  tax 


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