Impact on Landlord by moving outside Europe

Landlord Discussion Legal
1

If a UK resident landlord moves overseas, putting a tenant into their home in England, what happens to his financial position:

  • can the landlord claim they are resident in the UK when they live overseas but are, or are not, classed as resident in another country, e.g. not yet allowed to stay permanently in another country?
  • how did the UK banks react to finding this out?
  • can they still open saving accounts and earn interest on their UK savings?
  • will their bank accounts be closed or frozen?
  • will their banks refuse to send money overseas, or reduce the limits on what can be sent overseas?
  • in some countries, the UK State Pension is frozen, so if the landlord is late in informing the relevant government department, what then happens, especially if that department is informed months or years after the landlord has left the country?
  • what happened to frozen pensions when the landlord returns to live in the UK?
  • how do prospective tenants and existing tenants react when they find out that they have to deduct tax from rental payments and account for these to HMRC?
  • what is your experience of tenants withholding tax for HMRC and failing to provide this to HMRC by the required deadlines, or failing to provide HMRC with the correct forms or information by those deadlines, and are the the tenants penalised by HMRC for missing those deadlines?
  • if all their income is derived from UK rent and UK saving accounts, does it make any difference to the way that HMRC treats you, e.g. regarding allowance and tax rates and their interactions with you?
  • if the landlord is able to earn income from overseas, is that also taxed by HMRC in some form of reciprocal arrangement?
  • any other issue arising from a landlord being overseas?

This all assumes that the landlord satisfies all UK based Landlord responsibilities for their tenants, e.g. finds tenants, say via Open Rent or through other portals, arranges inspection and certificates for gas and electric installations, etc. But are there any additional responsibilities simply because the landlord is overseas?

2

I could answer most questions you have if you had provided adequate information surround the situation as the description is way to limited and the best advice i have for such questions is to pay a professional and present them your full situation as your questions needs to be answered with absolute legal certainty yet your tax questions can only be answered and pertinent for and on the day of your questions being asked as the tax rules change as and when.
I had similar questions answered which cost me just over £3,000 as i needed an international Tax advisor which you would also need as some your questions are surrounding another Country.

3

@John45

@Andrew8 has given you good advice as it sounds from your questions as though you are very new to this. I can answer some of your questions from my personal experience of being an overseas landlord for many years, but my situation will be different from yours, so you can’t take these answers as definitive.

*can the landlord claim they are resident in the UK when they live overseas but are, or are not, classed as resident in another country, e.g. not yet allowed to stay permanently in another country?

*how did the UK banks react to finding this out?

  • no issue with maintaining existing accounts but can’t open any new ones (which is against EU rules but hey…)

*can they still open saving accounts and earn interest on their UK savings?

  • no and yes

*will their bank accounts be closed or frozen?

  • only if you break the law regarding tax declarations and residency

*will their banks refuse to send money overseas, or reduce the limits on what can be sent overseas?

  • not in my experience

*in some countries, the UK State Pension is frozen, so if the landlord is late in informing the relevant government department, what then happens, especially if that department is informed months or years after the landlord has left the country?

  • you will need to state when you left. If you misrepresent this you are guilty of fraud. Your tax and NI records should match your declaration.

*what happened to frozen pensions when the landlord returns to live in the UK?

  • they are reset to the current level based on your entitlement

*how do prospective tenants and existing tenants react when they find out that they have to deduct tax from rental payments and account for these to HMRC?

*what is your experience of tenants withholding tax for HMRC and failing to provide this to HMRC by the required deadlines, or failing to provide HMRC with the correct forms or information by those deadlines, and are the tenants penalised by HMRC for missing those deadlines?

  • never done this. It’s the tax payer’s (ie your) responsibility to ensure tax is paid, so I don’t suppose HMRC would be very sympathetic to you.

*if all their income is derived from UK rent and UK saving accounts, does it make any difference to the way that HMRC treats you, e.g. regarding allowance and tax rates and their interactions with you?

  • doesn’t seem to. They don’t treat you as a tax evader unless of course you are

*if the landlord is able to earn income from overseas, is that also taxed by HMRC in some form of reciprocal arrangement?

  • very complicated topic and depends where you are living. In general tax is paid first in the country in which the income is earned and then again in the country where you are resident. This second slice may be subject to an agreement between the two countries to avoid double taxation. If this is going to be an issue for you, you definitely need specialist (expensive) advice.

*any other issue arising from a landlord being overseas?

  • difficult to oversee properties
  • need good agents (if such exist) or team of plumbers, electricians etc
  • need UK address for tenancy agreement

As I said before, this is all just my experience. It has no legal standing…

4

Many thanks Tony for your comprehensive reply and links.

I am sure it will be helpful to others who have similar questions.

5

For clarity, HMRC have a system of requiring the tenant or agent to withhold standard rate tax at source and requires them to make submissions to HMRC quarterly, with implied penalties, something I would not wish on my tenants. The landlord then has to use those tenant/agent tax returns to adjust their self assessment return to take them into account, which seems a long winded and error prone way of meeting one’s tax liabilities. It is at HMRC discretion whether or not the tenant/agent makes these quarterly returns or leave it to the landlord as part of their annual return, with no clue being given to the landlord as to which direction HMRC would take. Also, this is reviewed every time a proposed new tenant is considered to become a new tenant! At least that is what I have learnt, hence my concern and desire for feedback on the experience of others.

Thanks again for an excellent response Tony, while noting the caveat!

6

Yes I’m familiar with that system, but you can opt out (I have) by registering as an overseas landlord and using NRL1 to apply to have the rent paid to you gross. Having submitted the form I received a confirmation from HMRC that they didn’t require the tax to be paid by the agent or tenant. So you should know what to do. If not, I’ve always found HMRC helpline very helpful once I’ve got through.

I’m not sure where you’re getting your advice, but this isn’t reviewed every time a new tenant starts. I have several properties and have been an overseas landlord through many changes of tenant. The NRL1 form is valid per tax payer not per tenant. Nor does it need renewing.

If you’re asking an agent, they probably won’t have a clue, but all this info is easy to find on the Gov.uk website.

7

Thanks. I go this from their website some months ago. Nice to know of actual experience.