The Finance Act 1995 and Taxation of Income from Land (Non-Resident) Regulations 1995
Both the Letting Agent (or Tenant where there is no Letting Agent) and the overseas Landlord are obliged and responsible to deduct tax from the rental income.
Letting Agents are required BY LAW to withhold tax from rental income unless specifically exempted in writing by HMRC. Exemption is expressed by means of a letter detailing an Approved Number. This is commonly referred to as Exemption Certificate although HMRC terminology is Approved Number. The Letting Agent is required to:
The Landlord can apply for an exemption from deduction by the agent from HMRC whereby rental payments may be made to them without tax being deducted, subject to the submission of an Annual Statement of income and expenditure and the net tax liability to HMRC. ONLY Landlords can make the application and ONLY on receipt of confirmation FROM HMRC DIRECT to the Letting Agent in the form of a letter of exemption detailing an Approval Number can the agent pay rents gross to the Landlord.
HMRC will impose the following conditions on the Landlord before issuing the Tax Exemption Certificate:
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Please note these are general guidelines which are accurate at the time of compilation. We are however not qualified accountants and therefore strongly recommend that you take independent tax advice.
* Under Self-Assessment, taxpayers are required to calculate their own tax liability and submit figures to HMRC directly or via their tax adviser. HMRC can provide an information pack and guidance notes to assist you in this matter.