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Non-Resident Landlord Scheme

Non-Resident Landlord Scheme

Old Jan 21st 2016, 4:11 am
  #31  
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Default Re: Non-Resident Landlord Scheme

No idea about Canada, but in the US you should have declared all the UK income. Did you originally declare the tax as a deduction on your Canadian return or did you declare the full rental income?
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Old Jan 21st 2016, 7:01 am
  #32  
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Default Re: Non-Resident Landlord Scheme

Originally Posted by mrken30
No idea about Canada, but in the US you should have declared all the UK income. Did you originally declare the tax as a deduction on your Canadian return or did you declare the full rental income?
I didn't declare it on the last one as the tax year hadn't finished... It will need to be adjusted on this tax return I'm submitting for myself. We have an accountant in Canada as my husband is self employed. Just trying to understand it for myself which I clearly don't
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Old Jan 21st 2016, 8:31 am
  #33  
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Default Re: Non-Resident Landlord Scheme

Originally Posted by FatFrank
Tirytory,
Yes, I/we use the Andica software for our UK return self assessments.
Is this the best software to use, have you tried any other software. They seem to vary a lot in price. I assume you use the single tax payer version for 12.95
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Old Jan 28th 2016, 5:06 am
  #34  
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Default Re: Non-Resident Landlord Scheme

Thanks for all the replies!

I have been paying tax on my UK property rental this year (deducted by my agency), despite being eligible for tax-free income (as it's under my personal allowance). I submitted my forms to the HMRC but for some reason they were not processed and I carried on paying tax.

My question is: would it be easier to get my tax refunded at the end of the year by HMRC and then just pay all tax in the US?

Alternatively, it sounds like the personal allowance for non-residents will be going away soon, so should I get familiar with paying tax in the UK and declaring that on my US income so I don't get double-taxed?
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Old Feb 24th 2016, 5:35 am
  #35  
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Default Re: Non-Resident Landlord Scheme

Bump - can anyone please give some advice on my last post, please? Would it be preferential to pay income tax on rent in the UK or in the USA? Or does it not make a difference since a tax treaty exists between the countries. Thanks!
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Old Feb 24th 2016, 5:38 am
  #36  
 
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Default Re: Non-Resident Landlord Scheme

Originally Posted by Ferrino
Bump - can anyone please give some advice on my last post, please? Would it be preferential to pay income tax on rent in the UK or in the USA? Or does it not make a difference since a tax treaty exists between the countries. Thanks!
You don't get to choose, you follow the rules.
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Old Feb 24th 2016, 5:45 am
  #37  
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Default Re: Non-Resident Landlord Scheme

What are the rules? I am eligible to have all tax refunded in the UK, based on the total being under my personal allowance. So it seems I could either:

1. Take the refund in the UK and pay all income tax in the USA.
or
2. Not take the refund and declare all my UK taxes on my USA return (and not be "double-taxed" under the treaty).
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Old Feb 24th 2016, 6:00 am
  #38  
 
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Default Re: Non-Resident Landlord Scheme

Originally Posted by Ferrino
What are the rules? I am eligible to have all tax refunded in the UK, based on the total being under my personal allowance. So it seems I could either:

1. Take the refund in the UK and pay all income tax in the USA.
or
2. Not take the refund and declare all my UK taxes on my USA return (and not be "double-taxed" under the treaty).
Tax on rental property in the US is a LOT lower than in the UK - there are deductions that are not allowed in the UK. I am not certain about the UK rules on taxing rental income for non-residents.

If you can avoid tax in the UK entirely, you should do so.

If you are taxed in the UK but allowed to use your personal allowance in the UK and avoid all or most of the potential tax then you will still have to pay tax in the US, but the interest deduction and depreciation will take a huge slice of your taxable rental income in the US.
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Old Feb 24th 2016, 6:04 am
  #39  
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Default Re: Non-Resident Landlord Scheme

Thanks! Yes, there is still a personal allowance scheme in the UK for non-resident landlords and all of my income would fall within that amount. It sounds like it might be going away soon, though. I don't have a mortgage, but it sounds like there will still be a favorable deduction for depreciation in the US.
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Old Feb 24th 2016, 6:18 am
  #40  
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Default Re: Non-Resident Landlord Scheme

We let our UK home out during 2013-2015 whilst in the US.

When we left the UK we completed the Non Resident Landlord form for HMRC. We indicated that our annual rent would fall within our personal allowances, so no tax due. HMRC wrote back and agreed to us receiving our rent (via our agent) without tax deducted. We were required to complete self assessments for both 2013-2014 and 2014-2015 to declare the rental income.

The rental income was also included on our US tax returns and we paid
tax at whatever rate was required.

If you have not done so, you will need to complete the Non Resident Landlord form if you want to receive your rental income in full. Incidentally, we also completed form P85 to advise HMRC that we were moving abroad.

All of this information can be found on the HMRC website.

HTH
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Old Mar 2nd 2016, 5:54 am
  #41  
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Default Re: Non-Resident Landlord Scheme

Originally Posted by Ferrino
What are the rules? I am eligible to have all tax refunded in the UK, based on the total being under my personal allowance. So it seems I could either:

1. Take the refund in the UK and pay all income tax in the USA.
or
2. Not take the refund and declare all my UK taxes on my USA return (and not be "double-taxed" under the treaty).
The normal way of going around things would be to submit the appropriate form so that the UK managing agent does not deduct tax at source. Complete a UK self assessment at the end of the year. Then whatever tax you pay is a tax credit on the U.S. return.

Your options are in effect based upon relinquishing your right to a personal allowance. I have never heard of anyone wanting to do that before and no idea how one would go about it.

If you do find a way of relinquishing your right to a PA, I am still not sure for what purpose. If you pay tax of £100 in UK you get a credit for a £100 in USA. That there are different tax deductibles is irrelevant to the sums, that tax credit will be equal and opposite.

In conclusion, I would suggest you do things in the normal manner.
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Old Mar 2nd 2016, 6:04 am
  #42  
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Default Re: Non-Resident Landlord Scheme

Not sure I follow, Bermudashorts. In scenario #1, I exercise my right to a PA, in #2 I relinquish.

What may be confusing is that I have been taxed at source (by my rental agency) despite knowing that the tax would always come within my PA. The reason is that I submitted my forms to stop being taxed at source (to HMRC), but the forms were never processed for some reason (and so my agency kept deducting tax every month this year). Therefore, if I proceed with #1, I would be getting the taxes back after self-assessment.

My understanding (from a previous message) was the the tax I'd pay under #1 and #2 are not identical, because the US has more generous deductions on property rental income. In #1 I would be paying tax based on the US system and in #2 I would be paying tax according to the UK system.
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Old Mar 2nd 2016, 6:46 am
  #43  
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Default Re: Non-Resident Landlord Scheme

Originally Posted by Ferrino
Not sure I follow, Bermudashorts. In scenario #1, I exercise my right to a PA, in #2 I relinquish.

What may be confusing is that I have been taxed at source (by my rental agency) despite knowing that the tax would always come within my PA. The reason is that I submitted my forms to stop being taxed at source (to HMRC), but the forms were never processed for some reason (and so my agency kept deducting tax every month this year). Therefore, if I proceed with #1, I would be getting the taxes back after self-assessment.

My understanding (from a previous message) was the the tax I'd pay under #1 and #2 are not identical, because the US has more generous deductions on property rental income. In #1 I would be paying tax based on the US system and in #2 I would be paying tax according to the UK system.
In your scenario 1 you have used the PA and in your scenario 2 you have not used it. My first point, was that I have never heard of anyone opting out of a PA I do not know how you would go about that and indeed I am not sure that you can!

But In terms of the sums, even if you can make the option on PA as above, my point is the fact the UK and USA have different tax rules is irrelevant and your tax will be identical. Tax and tax credit is equal and opposite. I might explain what I mean better if I stick some random numbers down.

Let's say your profit in UK is £1000. In USA terms, your profit is lower, say £500 because you have also deducted depreciation. You have to declare the £1000 in UK and you have to declare the £500 (equivalent) in USA. Tax credits ensure you don't pay tax twice.

So option 1 is that you utilise your UK PA and therefore pay no tax in the UK. You will pay tax on the £500 US calculated profits at whatever US rate is, there is no tax credit as you did not pay tax in the UK.

So in option 2 you don't have a UK PA and therefore you pay £200 to HMRC. On your US tax return, you disclose the US computed rental profit of £500 pay tax on that at whatever rate, but then offset it with the £200 credit for the tax paid to HMRC. So net result is exactly the same whatever "option" you use.

There is absolutely no question of you simply choosing under which regime you want to pay tax to. This choice is not yours to make. The only question mark that I can see, is whether you have the right to choose not to use your personal allowance in the UK - and my point is that it makes no difference.

Last edited by Bermudashorts; Mar 2nd 2016 at 6:55 am.
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Old Mar 3rd 2016, 8:39 am
  #44  
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Default Re: Non-Resident Landlord Scheme

Thanks for explaining that there's no difference between the 2 scenarios. I guess I was confused because the absolute amount taxed on the property would be different between the 2 tax systems (due to deductions) and I thought I might lose the difference if I payed tax at the higher rate (UK). But I will just get it back as a credit.

I now have a question about timing: as mentioned, I have been paying tax at source, despite being eligible to get it all back as part of my PA. So I assume that, when I complete my UK self-assessment, I will get the tax back as a refund. But before then, I will have had to complete my US return. Do I just declare that I paid tax in the UK this year and then declare the forthcoming refund in the following year's US return?
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Old Mar 3rd 2016, 8:11 pm
  #45  
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Default Re: Non-Resident Landlord Scheme

Originally Posted by Ferrino
Thanks for explaining that there's no difference between the 2 scenarios. I guess I was confused because the absolute amount taxed on the property would be different between the 2 tax systems (due to deductions) and I thought I might lose the difference if I payed tax at the higher rate (UK). But I will just get it back as a credit.

I now have a question about timing: as mentioned, I have been paying tax at source, despite being eligible to get it all back as part of my PA. So I assume that, when I complete my UK self-assessment, I will get the tax back as a refund. But before then, I will have had to complete my US return. Do I just declare that I paid tax in the UK this year and then declare the forthcoming refund in the following year's US return?
I don't know the timing of the US tax year so not sure what makes sense on timing. Going forward it really would be a lot easier if you just filled in the non resident landlords form.
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