Are you a residential landlord or the owner of multiple homes that you rent out to tenants?
Well, if you Steven Glicher’s accountants would like to make you aware that HMRC is launching a new crackdown to target what it believes are significant tax underpayments in the sector. Any landlord suspected of underpayment will be receiving a letter from HM Revenue and Customs in the coming weeks asking for further clarification of rental income as part of a new initiative – the Let Property Campaign.
The Let Property Scheme campaign is designed to give landlords an “opportunity to bring their tax affairs up to date” and receive “the best possible terms to pay the tax they owe”. The campaign is aimed primarily at residential landlords and requires full disclosure of unpaid tax in return for preferential payment terms. Underpaying landlords of residential property who fail to disclose their full tax underpayments could face prosecution. You can find more information on the Let Property Campaign on the Gov.uk website.
So what’s brought this about? Well, HMRC believes that some landlords are not paying their fair share of tax.
It is believed that the underpayment problem is most significant in London, East Anglia and South Wales. In these areas landlords are coming under increasing scrutiny, particularly those who claim a Capital Gains Tax (CGT) exemption on the sale of a property under Principle Private Residence (PPR) relief which was introduced for residential property bought or acquired after 31/03/1982. Under the regulations homeowners who dispose of their homes will not have to pay Capital Gains Tax if they satisfy one of two conditions: that it has been their only home or main residence, and that it has been used as a home and for no other purpose.
HMRC will be asking landlords for information about the number of tenants, property addresses and other additional information. Landlords will also be required to supply additional information about how and when they purchased the property, and whether or not they have a mortgage.
Homeowners suspected of ‘flipping’ their primary place of residence in order to obtain PPR relief have already been the subject of many HMRC challenges of late. In October 2013, accountants began to warn that HMRC were chasing landlords more aggressively regarding their underpaid tax. The following month, they launched a targeted underpayment campaign against so-called ‘accidental landlords’.
Capital Gains Tax is a highly complicated area of tax law requiring specialist knowledge.
For more information on CGT liabilities, EIS, SEIS, EMI and expert advice on how you might be able to reduce the amount of any chargeable gain, contact Steven Glicher accountants on 0161 485 8007.