HMRC is targeting residential landlords who it suspects are not declaring their full rental income, warns tax advisory service Kreston Reeves.
The campaign comes in advance of Jeremy Hunt’s first Autumn Statement this week, and amidst rumours of a further attack on residential landlords with higher rates of Capital Gains Tax on property disposals and higher rates of National Insurance.
George Guilherme-Fryer, a director at Kreston Reeves, comments: “These ‘nudge’ letters are widely targeted at individuals or businesses based on information received, primarily from other governmental departments, banks or, in this case, the tenancy deposit scheme.
“Landlords in England are limited to taking a five weeks’ deposit for new and renewed tenancies with rent under £50,000 a year or up to six weeks if the annual rent is £50,000 or more.
“As most landlords take the maximum deposit, it is not difficult calculation for HMRC to calculate the expected rental income which should be included in a tax return.
“For example, if the deposit held with the tenancy deposit scheme is £1,000, five weeks of £200, then HMRC will assume an approximate rental income of £10,400 annually, or £200 per week.”
Guilherme-Fryer says these latest letters tend to include a statement saying that HMRC has received relevant information, suggesting the landlord review their tax position, and including a suspiciously simple certificate of tax position to be completed and returned.
He adds: “These letters will not take into account vacant periods or reductions in rent and will often mean that no action is required and there is no obligation to respond or to sign the certificate of tax position.
“But landlords are advised to review their tax position if such a letter is received to identify if any disclosures are needed. If they are ignored and it is later found that tax is due, it may lead to an investigation and potentially a criminal prosecution.”
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Typical, go for the easy option
What about Amazon etc ?
Do what Sunik does - register it abroad
Eh? What has 'Sunik' registered abroad?
And who is Sunik?
Suppose if they had ‘t been so greedy by introducing C/tax on vacant property they would know what the vacant periods were as well. The only chance we get to maintain existing or improve for regulatory requirements is between Tenancies contrary to what Council’s thinks can be done anytime, notwithstanding the fact when the property is occupied its jammed full full of their over accumulated belongings, never the access problem they created. No surprise then if landlords can’t sleep & wide awake at 4.00 o’clock am.
Amazing how HMRC can use information from the deposit protection schemes when it suits them but not when it might actually be beneficial to tenants and landlords.
Initially I assumed mydeposits asked how much the annual rent was to provide data for the government to base the 30th percentile rent on for LHA. When I asked them why we were still getting the Valuations Office rent surveys the person at mydeposits told me they didn't give that sort of information to the government.
No problem, ALL the rent I receive is declared on my tax return, I have good tax investigation insurance and I use a top company of accountants, so if I receive one of these letters I shall simply forward it on to my accountant to deal with.
Agree, if you run your business correctly you have nothing to worry about. Like you, I let my accountant do the work.
It is common knowledge the data is used for this purpose.
Jo the person you spoke to is probably not allowed to tell you, like your Solicitor he will inform about you but not allowed to tell you.
Andrew don’t have so much faith in Accountants, they stand behind not in front of you when there’s a problem.
What about those renting to relatives and friends who declare nothing……
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