WATCH OUT LANDLORDS – TAXMAN!
“Ghost” tax officers
The Financial Times has reported that “Ghost” tax officers are being employed by the Revenue to check advertising cards in shops and supermarkets in order to catch out landlords that are letting out their properties and failing to declare it according to accountancy firm PKF. To get up to date guidance on landlord tax remember to consult the Landlords Bible.
500 letters sent to landlords
As a result of preliminary searches, 500 letters have been sent out by HMRC to landlords who may have failed to declare their investments. Tax advisers say anyone who receives a letter should respond as soon as they can.
Although the letter states:
“this is not a formal enquiry”, tax advisers say the correspondence is significant and that as well as responding quickly, individuals should also remember that any reply they give will be kept on record. The taxman is asking property owners to provide details of income relating to their rental properties between April 2001 and April 5 2007. This means landlords should collate as much information as they can on any income or payments relating to their property for this 6 year period.
Retrospective tax for landlords
If the HMRC finds that owners have received rental income and have not included it in their tax returns, then it can demand retrospective tax, as well as impose fines and demand interest owed for the past 20 years. The HMRC has always had the powers to requisition information and has in the past targeted letting agents, local authorities, and mortgage lenders to obtain a landlord’s details and information about their rental income.
Many landlord organisations have long suspected that the much lambasted Tenancy Deposit Scheme (TDS) was a ‘Trojan Horse’ invented by the Inland Revenue just to collect landlords details in order to be able to check that they had not been evading tax.
Are you a landlord who wants to avoid the TDS?
Chris Horne Editor of Property Hawk comments:
“Many landlords who have started off letting one or two properties have never declared their rental income because they new that after accounting for mortgage payments and other deductions that they weren’t making a rental profit.
However, as a landlord’s residential investment portfolio grows they can all of a sudden find that they start generating significant income. Once a landlord is outside of the ‘tax loop’ it gets more and more difficult to come clean with the Inland Revenue. Landlords should always declare all their income as thanks to the Property Manager free landlord software it’s a lot easier than they might think to keep track of their rents and payments and calculate their end of year tax liabilities.”
The moral of the story seems clear that the risk vs reward of tax evasion means that it is no longer worth a landlord trying to hide their rental business from the Inland Revenue. The net is closing. Landlords should be aware that tax evasion is a criminal offence and can result in a custodial sentence. Therefore landlords should consider ‘coming clean’. It might be a lot less expensive than a landlord might think and certainly far more attractive than a ‘stint inside’.
Landlords looking at saving tax should read this.
For further tools and advice on taxation on rental properties visit the Property Tax Portal.
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