Retaining Tax
Table of Contents
Landlords who live overseas are liable for tax on income from rented properties in this country. As the Agent you will be held liable for that tax unless a suitable waver is received and acknowledged by the Inland Revenue.
The percentage of income to be retained is entered on the Company Preferences screen.
Tick “Net” to indicate that you wish to only retain a percentage of the net income after expenditures are deducted. This is the usual thing to do and the examples below assume it is set.
The option to retain tax is decided for each building. Tick the Retain Tax check box on the Building Management screen and set the date of the last tax payment (or the date income was first received by you the agent). Rentman will retain a percentage of (net) income since that date.
Each time Rentman calculates how much money is to be paid to the landlord (e.g. when you print a statement) it calculates the rent received since that date less the expenses paid since that date and divides by the Tax percentage on the company preferences screen : this “to be retained” amount is then deducted from the amount the landlord is to receive.
It is important to be aware that nothing happens to this money - it is simply a portion of the current balance that will not be paid, automatically at least, to the Landlord. At each statement the current balance is printed with, if appropriate, how much of that balance is being retained because of tax. The amount retained is included in the balance. There is no posting of a monthly “tax retained” amount.
If, for instance, tax was last paid on 1 July 2020 then with each management statement Rentman asks how much has been received since 1 July 2020 less expenses since 1 July 2020 divided by the tax rate; that way the amount being currently retained adjusts itself if one month has a lot of expenses.
For instance, assuming monthly statements, tax retention of 25% , a 5% commission charge, a float of £100 and a monthly rent of £800. At the end of the first month a statement is sent together with an invoice for £47 commission (inc VAT), a payment to the Landlord of £453 and showing a balance of £300 - of which £200 is being retained against tax. At the end of the second month another statement shows another invoice for £47, a payment of £553 and a balance of £500 - of which £400 is being retained against Tax.
The Building Management screen shows the current balance and the tax being withheld - both now and as of the last statement.
If at some later date HMCE send a letter confirming that you no longer need retain for a landlord after a certain date….. enter that date on the landlord screen where it says NRL8.
If a building has multiple landlords each will have their own NRL8 date (or none at all) and Rentman will calculate what needs to be retained accordingly.
The balance (minus the float) will be recalculated and any “over retention” will be automatically paid over at the next statement - because it is still (and has always been) part of the current balance.
Each quarter you will be expected to pay the amount of tax retained to the Inland Revenue.
Go to the Tax tab of the building screen; you will see the receipts and expenditures between the last tax payment and the end of the quarter. You have the option to clear the checkbox alongside an expense if it is not deemed deductible.
Click the “Pay Tax” button in the ribbon.
Note the date you enter here is the date on which the payment is made… not the end of the quarter.
An Income Tax paid transaction is entered and the amount paid will be deducted from the landlord’s balance as with any normal bill payment.
Rentman will update the “Retain Tax after” date to the end of that tax period (30/09/2020 in the example above). The amount of tax retained is then recalculated to include only rent received since that new date. Anything left over (i.e. more retained than was paid) will automatically be paid over to the Landlord at the next Management Statement - because it is still (and has always been) part of the current balance. You don’t have to post or move money from one place to another – the balance and the amount to be retained simply adjust themselves from the new ‘Retain Tax after” date.