Overseas landlord tax clampdown

The taxman has recently sent letters to non-resident corporate landlords that haven’t paid tax on their commercial properties in the UK.

HMRC is able to target its campaign with some precision. This is because it can use property ownership details from the new Companies House property register. This register went live in 2022. All overseas entities that own land or property in the UK now have to declare their beneficial owners and / or managing officers.

What’s in the overseas landlord letter?

The letter has been sent to companies that appear to have not told HMRC about their tax liabilities.

It tells companies that they need to complete an enclosed certificate. If the company needs to make a disclosure, they have to go online to tell HMRC about underpaid tax from previous years.

If a company doesn’t need to make a disclosure, they still have to complete the certificate and return it to offshorecompaniescommnrlnf@hmrc.gov.uk.

HMRC also warns companies that they have only 40 days to respond. It says, “If we later find that you have not told us everything, we’ll view this very seriously”.

If a company doesn’t respond within 40 days, HMRC explains that, “we may assess what we believe the company owes. If appropriate, we may open an investigation and consider charging additional penalties.”

What taxes should overseas landlords have paid?

Before 6th April 2020, rental income received by non-resident landlords was subject to Income Tax. After this date the taxation regime changed and such income became subject to Corporation Tax.

However, some companies will have had tax deducted at source under the Non-Resident Landlord Scheme. In such cases, they need to give HMRC details of the tenant or letting agent who withheld the tax and paid it on the company’s behalf.

What happens if a company hasn’t paid tax?

If a company hasn’t paid the correct taxes, it has a number of options. Firstly, it can tell HMRC of any genuine error, and how that error was made. Secondly, it can explain any valid reasons it may have for not declaring income. And thirdly it can admit it has committed tax fraud. In the latter case, a company would need to fill in Form CDF1. This can be found here.

What are the penalties for non-payment?

If a company hasn’t declared and paid taxes correctly, HMRC may not charge a penalty if the landlord has a reasonable excuse. However, if they have deliberately avoided taxes, HMRC will apply a penalty of between 50% and 100% of the tax owed.

In addition to penalties, HMRC also charges interest on late tax payments under Section 101 of the Finance Act 2009.

Are you an overseas landlord needing help?

If you are an overseas landlord and you need advice, THP’s accountants can help you. If you have received the letter from HMRC, it explains how you can authorise an agent to deal with HMRC. Normally this is done using Form 64-8. This can be found here. However, if you get in touch, we’ll talk you through the process and advise you on how best to respond to HMRC.