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Snugglybear

Hmrc Already Going After Btl Landlords

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I know it's a firm of accountants touting for work, but still, the story's quite amusing.

http://news.bbc.co.uk/1/hi/business/10352406.stm

Landlords warned not to disguise property profits

Buy-to-let landlords have been warned not to disguise their profits from the taxman after selling their properties.

Accountancy firm UHY Hacker Young says tax officials are increasingly trawling through Land Registry records to check the accuracy of tax returns.

If a property is not a seller's main residence then capital gains tax (CGT) may be payable on the profit.

Hacker Young said special investigators were raising £10,800 for each special enquiry, up by 79% in two years.

The amount of money raised from each investigation rose despite the fact that the number of special enquires actually fell - down by 31% from 9,900 in 2007-08 to 6,800 in 2009-10.

"This is a massive increase in capital gains tax from enquiry work, particularly as the [total] amount of CGT payable has collapsed as asset values slumped during the recession," said Roy Maugham, tax partner at UHY Hacker Young.

"It shows just how aggressive HM Revenue & Customs [HMRC] is becoming in tackling tax evasion in this area."

The increased cash being found by the tax authorities was revealed by Freedom of Information Act requests lodged with HMRC by Hacker Young.

They reveal that in 2007-08 the special investigation teams of the Revenue raised £60m in extra CGT while two years later they raised £74m - an increase of 23%.

The work was conducted by teams of special investigators set up in the past three years in the regional offices of HMRC.

Their establishment has come alongside the Revenue's widely publicised campaign to uncover people who are hiding taxable income in offshore bank accounts.

"We risk assess returns using a variety of methods, as well as cross-matching database information, both our own and external," said an HMRC spokesman.

"Enquiries into the disposal of second homes is just one area we look at," he added.

CGT is payable on the sale of most assets, not just property.

But Roy Maugham explained that in his firm's experience, a few buy-to-let landlords seemed prone to flouting the rules.

"It is something we are seeing, especially where they do not use an accountant," he said.

"There are quite a number of people who won't have reported it [the sale of their property] in the first place.

"They think they can get away with it," he added.

About 130,000 people paid capital gains tax in 2008-09.

The profit made on selling a property is liable to CGT unless it is someone's main home at the time of the sale, or was their main home at any time in the three years before.

Sellers also have an annual tax-free allowance of £10,100 to set against any CGT bill.

Even if there is still CGT to pay, a landlord can reduce the bill by offsetting:

•the cost of buying the premises, such as stamp duty, legal and surveyor's fees

•the cost of selling the property, such as legal or estate agent's fees

•the cost of any enhancements at any time in the period of ownership, such as a loft extension or garage or conservatory.

Roy Maugham said it appeared that HMRC investigators were increasingly challenging "enhancement" claims on tax forms because they were really for things like painting and decorating.

Such items do not qualify for tax exemption as they are not capital expenditures.

"The landlords sometimes feel they have had the costs but can't prove it, because they haven't kept the necessary paperwork," Maugham said.

"Many HMRC investigations lead to disagreements over whether some costs are repair costs or enhancement to the property.

"HMRC often challenges the records for expenditure going back 20 years or more," he warned.

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Hmm, CGT raise backdated? Wouldn't that be nice...

Although, for a HPC I suppose we want CGT of 50% brought in on second homes on Jan 1st 2011 to cause a panic sell now.

it will be April 2011. Questions is how much and what are the concessions.

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Yes, Daily Politics talking about second home owners now - they have a pre-recorded location item on CGT fro second homes which says a lot in itself - i.e. the BBC journos must have been given the nod already.

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The Editor of Country Life is very worried - if people thought that a house worth 250K was worth 180K it would be very bad - LMAO!

He did the item for TDP and he went to some village to point out that all the second home owners give jobs to the local re painting their houses, cleaning their gutters and gardens - INCREDIBLE!

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The Editor of Country Life is very worried - if people thought that a house worth 250K was worth 180K it would be very bad - LMAO!

He did the item for TDP and he went to some village to point out that all the second home owners give jobs to the local re painting their houses, cleaning their gutters and gardens - INCREDIBLE!

Incredible. They usually complain that no one 'born in the village' can any longer afford a cottage because of 2nd home owners. Devon and Cornwall are in this bracket. Over 50% of properties in Devon are 2nd homes! Over many years this daft tax break for holiday home owners has destabilised two counties.

How was it ever right for someone to buy a 'cottage' and then write off the 'loss' on mortgage payments v rent receipts, against their taxed salary, for simply renting it out for a minimum of 10 weeks???!!!! Mr Darling announced the end of this in March, but watch and see if Osborne keeps it. And, yes I have asked the govt to do so, on the basis it was the only thing Darling got right.

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I know it's a firm of accountants touting for work, but still, the story's quite amusing.

"The profit made on selling a property is liable to CGT unless it is ..., or was their main home at any time in the three years before. "

No, no, no, no, no, that is not the rule.

Jeeze, where do they train these accountants?

tim

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The Editor of Country Life is very worried - if people thought that a house worth 250K was worth 180K it would be very bad - LMAO!

He did the item for TDP and he went to some village to point out that all the second home owners give jobs to the local re painting their houses, cleaning their gutters and gardens - INCREDIBLE!

Talk about misuse of statistics.

He said that "on average" a house sells for 70K below asking and then took that figure off the cheapest house in the list. Does he really think that that discount is the fixed, regardless of the price of the house.

tim

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No, no, no, no, no, that is not the rule.

Jeeze, where do they train these accountants?

tim

Is this the accountants' wording, or the hack's?

Does it refer to the rule phrased on the Direct.gov website as

"Even if you no longer live in your property, you can still qualify for the full amount of Private Residence Relief, provided that:

- the property has been your main home from the time that you bought it

- it has otherwise fully qualified for Private Residence Relief (for example, you have not used part of the property exclusively for business purposes)

- you sell it within three years of moving out or it no longer being your main home"

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Is this the accountants' wording, or the hack's?

Does it refer to the rule phrased on the Direct.gov website as

"Even if you no longer live in your property, you can still qualify for the full amount of Private Residence Relief, provided that:

- the property has been your main home from the time that you bought it

- it has otherwise fully qualified for Private Residence Relief (for example, you have not used part of the property exclusively for business purposes)

- you sell it within three years of moving out or it no longer being your main home"

yep!

It's a complete misunderstanding of this rule, it's an AND not an OR.

tim

Edited by tim123

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  • 146 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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