Rental Income Transfer to non-UK residents

Hi HMRC team, Hope you are well. I am a UK resident under a working visa and I own a property in my sole name. This property is currently being let and I have been receiving rental income alongside my salary which in total exceeds the high tax rate band. My parents also own a UK property (50:50 share) and this property is not being let and receive no rental income. My parents are not UK residents and they live abroad. I am aware under TSEM9520 (https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem9520), I can transfer the beneficiary interest (i.e. rental income) to the intended person with a written declaration as an express trust. I have completed a declaration of trust detailing the desired share of beneficiary interests between me (the owner) and my mother (the intended beneficiary). I am also in the process of registering a trust for this declaration. However, given that my mother owns a UK property but she is not a UK resident, I would like to confirm here that the procedure I have been following is correct. Please let me know if the above is permitted by HMRC. I appreciate your comments and guidance very much. Kind Regards Gloria

Hi ,
 

Thank you for your question. I have looked at the guidance held in the Trusts, Settlements and Estates Manual and particularly at TSEM9520. Based on the content of your question, I cannot see a reason why you should not proceed with your proposal. As the intended beneficiary is not a UK resident, they will still be liable to pay UK tax on any rental income. They can register under the Non-Resident Landlords Scheme. Further information is available at: What the Non-resident Landlords Scheme is  .  Thank you .

Hi Admin 17, Thanks so much for your prompt reply. I would appreciate if you could help to clarify a few more things for me. 1. If I transfer beneficiary interest (i.e. rental income) to my mother, can she file in paper-formed self-assessment for her tax declaration to HMRC ? Or is it mandatory for her to be registered under the non-resident landlords scheme and instruct letting agent to deduct tax from rental income received? 2. Can we amend the share of beneficiary interests between me (the owner) and my mother (the intended beneficiary) in the future if any circumstances change? Should I inform HMRC about any changes in share? 3. Shall I send a copy of the trust declaration document to HMRC apart from registering a trust ? Again, thank you so much for your assistance and clarification. I look forward to hearing back from you. Kind Regards Gloria

Sorry, adding on my previous questions - I would like to confirm if the transfer of beneficiary ownership will have any implications on the selling of the property in the future? If my mother is the 100% beneficiary owner of the property I own, will this give rise to implications on capital gain tax, inheritance tax, etc. in the future sales of this property? Are we allowed to amend the agreed share anytime in the future (for tax planning purposes)? I really appreciate your clarification and professional advice. We would like to have more awareness and reassurance before we proceed safely. Thank you. Kind Regards G

Hi,

 

Thank you for your question. Rental income would need to be declared via a Self Assessment tax return. If your mother is not yet registered for SA, she can do so by following the guidance at : Check how to register for Self Assessment  . If your mother wishes to apply to have UK rental income without deduction of UK tax, she can apply for the Non-resident Landlord Scheme at : Non-resident landlord: application to have UK rental income without deduction of UK tax — individuals (NRL1). Most types of Trust giving an interest in property to somebody who is not the legal owner, now need to be registered with HMRC via the Trust Registration Service. Information regarding which types of trust need to be registered is available at: TRSM23050 - Types of trust that need to be registered: contents: excluded express trusts: contents: property ownership - HMRC internal manual - GOV.UK (www.gov.uk). You can amend the beneficial interests in the future. You can notify HMRC of any changes but won’t need to send a copy of the trust registration. Your question regarding Capital Gains and Inheritance Tax are not appropriate to this forum. Thank you .