Jump to content
Complete France Forum

UK house rental tax queery Please.


crossy67

Recommended Posts

Hi.

We still own our old UK home and have decided to rent it out to bring us a bit of income in.  We got in touch with our UK accountant who has written the following.

Unfortunately, the rental income is taxable in the UK, as is the

interest.  It is more complicated than that too!  As a non-resident

landlord the rental income should have tax deducted at source, that is by the

letting agency (if you are using one).  You can fill in a form to get

exemption from having tax deducted at source but I am not sure it is worth the

hassle.  The link below gives you full details of the way it should work:

 

http://www.hmrc.gov.uk/cnr/nr_landlords.htm

 

In addition to the above there is a possibility that as French

residents the income is also taxable in France, although the tax due would

almost certainly be reduced by the UK tax already paid.  I am afraid I do

not know enough about French tax to be able to advise on this!

We are letting the house privately to a family member and not through an agent.  I was always under the impression we would pay tax on the income here in France and it would be bundled up together with our earnings.  Have I got it wrong, again?  Do we need to pay UK tax AND French tax?

Thanks for any advice.

Ian

Link to comment
Share on other sites

You pay tax in the UK on UK rents, and under the doube taxation agreement, you are taxed again in France but you are given credit against French tax for the UK tax paid.

As a non-UK-resident, if your UK tax affairs are in order and up-to-date, you can obtain a dispensation allowing you to receive the rental income gross. Without this, then the tenant MUST deduct a basic rate of tax and pay it over to HMRC: otherwise they could become liable to pay it anyway.

Regards

Pickles

Link to comment
Share on other sites

[quote user="Pickles"]You pay tax in the UK on UK rents, and under the doube taxation agreement, you are taxed again in France but you are given credit against French tax for the UK tax paid.

As a non-UK-resident, if your UK tax affairs are in order and up-to-date, you can obtain a dispensation allowing you to receive the rental income gross. Without this, then the tenant MUST deduct a basic rate of tax and pay it over to HMRC: otherwise they could become liable to pay it anyway.

Regards

Pickles

[/quote]

Hi,

      You are NOT given credit in France for the UK tax paid on rents--you are given a credit equal to the whole amount of FRENCH tax which would be due on those UK rents (the french tax is calculated , and then exempted by a credit--it's a silly system , but thats it!)

Link to comment
Share on other sites

Check with your UK tax office re receipt of Rent Gross.  We receive rent gross without needing specific permission from HMRC because it is below the threshold for this. The threshold is for each owner so if owned as a couple the amount is doubled.  I will check the amount and find the paragraph re this on HMRC website and then edit this.

EDIT: threshold is 100 pounds per week per owner.  See HMRC website, individuals, Overseas Landlord scheme.  This is for rent paid direct to the owner(s).

Link to comment
Share on other sites

[quote user="milkeybar kid"]Parsnips .. I can follow exactly what you say but am I right in thinking that also this income that is net of the "French tax" will then be added to any other income be it investments or / and UK state pension, an accumulation to ascertain what tax bracket you come under in France ?[/quote]

Hi,

      First they work out the total french tax that would be due on your total income from all sources including the UK exempt income.  Then they work out how much of that bill relates to the exempt income and deduct a credit equal to that amount from the total (notional) french tax bill--what remains is what you have to pay.

Link to comment
Share on other sites

Thanks for the replies people. 

We have received this from our accountant:

In the situation where there is no agent I think the tenant is

supposed to deduct the tax which seems to me to be bureaucratic nonsense. 

I would be tempted to collect the rent as usual and simply declare it on your

tax returns.  Whilst technically you may be breaking the rules there would

be no loss of tax to HMRC so they would not really have any cause for

complaint.  The rules are set up to stop non-resident landlords taking the

money and never paying any tax but this is clearly not going to be the case here.

Why is nothing in life and tax simple :-(   I think we shall leave it in the hands of him, he's always been a very good asset.

Link to comment
Share on other sites

When I was thinking about doing this when I lived in France, I called them and went over it with them in the tax office. Simples. Then after us going over what I was told, we decided it was too much hassle and didn't.

I too was told that the tennant can deduct the tax and I was also told that we could just declare the tax ourselves and get our tax allowance but we'd have to apply to do that.

 

Call them, they were very helpful, if my failing memory isn't letting me down, I think it was Nottingham I spoke to.

Link to comment
Share on other sites

I did give details in an earlier post of the 100 pounds threshold for deduction of tax at source. If property owned by a couple the threshold is therefore 200 pounds per week.

It is on the HMRC website in black and white, and we telephoned HMRC to confirm the figure had not changed.  It gave us great pleasure at the time to explain this to a snooty London firm of solicitors!

Link to comment
Share on other sites

Hi, Hereford is exactly right and moreover if you do not employ an Agent and you have say 5 students in your property then even if they are party to a joint tenancy agreement with joint and several liability for paying the rent, each has a £100 threshold to meet in respect of each joint landlord before the tenant would be obliged to deduct tax from the rent at source. As regards having a husband and wife as joint tenants I am not sure if HMRC would count these tenants as separate for the purposes of the threshold, but if so the overall limit for a husband and wife as landlords may double to £400 per week (£1733 per month).

This £100 limit doesn't apply to property managed by an Agent however. In this case no limit applies and the Agent must deduct tax before paying over to the landlord unless the landlord is registered with the non-resident landlord scheme and HMRC (centre for non-residents (CNR)) has granted an exemption to the landlord and has informed the Agent that it can pay the rent over gross.

My other understanding is that it is not the landlord's responsibility to ensure that the tenant(s) or Agent (where it is obligatory for them to deduct tax at source and make returns (quarterly) to HMRC) are aware of their responsibilies or that these payments are actually made. Nor in any sense is the landlord liable (other than for their correct amount of applicable income tax) if the tenant or Agent defaults in their responsibility. If HMRC chases anyone it would be the tenant(s)/Agent not the landlord(s).

What I need to check with CNR is whether if all tenants pay less than £100 to each non-res landlord, is it ok just to leave everything well alone. Point is, if you don't use an Agent, if you seek dispensation for payments to be made to you gross, you only need apply once, but you must inform CNR everytime there is a change of tenant or Agent and they write to each tenant or Agent telling them its ok to pay rent gross. In the case of my wife and I that would mean a lot of paperwork and subsequent queries from tenants as each of our properties is re-let every 6 months to a new group of students. If anyone has had such advice from CNR on this topic of whether or not to register if no party is above the £100 threshold I'd be interested to hear what was said.
Link to comment
Share on other sites

Archived

This topic is now archived and is closed to further replies.

×
×
  • Create New...