Jump to content
House Price Crash Forum
Sign in to follow this  
InlikeFlynn

Hmrc Investigation Into Btl Pays Off

Recommended Posts

Apologies if this has already been posted.

More at the link

http://www.telegraph.co.uk/finance/personalfinance/tax/11335872/HMRC-investigations-into-buy-to-let-spark-surge-in-tax-receipts.html

Much interesting data on CGT collection from buy to let landlords. The statistic that caught my eye was

"Fewer than 500,000 taxpayers are registered with HMRC as owning second properties. The taxman estimates that the true number of landlords is much higher, at around 1.5 million"

Extraordinary.

Share this post


Link to post
Share on other sites

It's largely irrelevant anyway; and have to wonder why they make this the focus. Registering doesn't mean anything. The whole point is to not pay tax. Any BTLer paying net tax is doing it wrong. Buy, depreciate for net zero upkeep costs and zero income tax liabiity, sell for net zero capital gains liability, buy...

BTL deductions from taxable Income: Mortage interest, Maintenance costs, 10% wear/tear, Letting agent fees, Ground rent, Management fees, Accountant fees, Insurance, Utility bills or council tax. Deductions from Capital Gains: CGT allowance, Previous year 'losses', Private residence relief, Lettings relief, Solicitor fees, Estate agent and marketing fees, Stamp duty.

Share this post


Link to post
Share on other sites

It's largely irrelevant anyway; and have to wonder why they make this the focus. Registering doesn't mean anything. The whole point is to not pay tax. Any BTLer paying net tax is doing it wrong. Buy, depreciate for net zero upkeep costs and zero income tax liabiity, sell for net zero capital gains liability, buy...

BTL deductions from taxable Income: Mortage interest, Maintenance costs, 10% wear/tear, Letting agent fees, Ground rent, Management fees, Accountant fees, Insurance, Utility bills or council tax. Deductions from Capital Gains: CGT allowance, Previous year 'losses', Private residence relief, Lettings relief, Solicitor fees, Estate agent and marketing fees, Stamp duty.

Of course landlords try to reduce their tax bill, but the only way to achieve that is to have no net income or no other income.

Share this post


Link to post
Share on other sites

Of course landlords try to reduce their tax bill, but the only way to achieve that is to have no net income or no other income.

I'm not understanding you. Having no net income and/or net gain is what I'm saying, hence what does an hmrc investigation into the efficacy of its own dodgy rules achieve?

Share this post


Link to post
Share on other sites

What's all this about 'registering' anyway? AFAIK they are not obliged to 'register'. They are simply supposed to declare rental income/capital gains on their tax return, and they are not obliged to provide addresses or any other info.

Are letting agents supposed to inform the taxman? But even if they are, there are masses of LLs who don't use letting agents.

Share this post


Link to post
Share on other sites

If you have capital gains from BTL, you can roll them over into an EIS investment. A number of investors do exactly that.

Realised gains. Who's sold?

Share this post


Link to post
Share on other sites

It's largely irrelevant anyway; and have to wonder why they make this the focus. Registering doesn't mean anything. The whole point is to not pay tax. Any BTLer paying net tax is doing it wrong. Buy, depreciate for net zero upkeep costs and zero income tax liabiity, sell for net zero capital gains liability, buy...

BTL deductions from taxable Income: Mortage interest, Maintenance costs, 10% wear/tear, Letting agent fees, Ground rent, Management fees, Accountant fees, Insurance, Utility bills or council tax. Deductions from Capital Gains: CGT allowance, Previous year 'losses', Private residence relief, Lettings relief, Solicitor fees, Estate agent and marketing fees, Stamp duty.

HuH?

If you depreciate, you crystalize all this at Sale.

Other fees are claimable with invoice.

Utility Bills?

Sounds to me your scenario for a BTL tax return will end up sending them to prison.

Share this post


Link to post
Share on other sites

If you are running a business then that should be included on your tax return even if the additional tax to pay is zero.

There is a whole section of the tax return dedicated to property investments so I think they are well aware of the potential.

Share this post


Link to post
Share on other sites

The trouble is it's only CGT that there might be substantial tax due. If you only have 1 property the taxman won't really be interested as the tax liable won't be worth the time pursuing it.

For example if you are collecting £550 a month, that's £6600 a year so basic rate tax liable is 20%, £1320 at first glance. However after deductions and expenses you might be down to say around £1000 of income that's taxable that's £200 tax owed!

As we all know BTL isn't a money making machine on the rent, it's the house price growth that really generates the income and it's the CGT that will get the BTL, at which point I'm sure they'll then face large penalties for not declaring the income they hardly owe any taxes on. For anyone in BTL declaring the income is the more sensible option as there will be near zero tax to pay on it anyway because the profits are minuscule, however I'm guessing most BTL landlords don't the intelligence to work out staying legal ensures you pay less tax.

In fact if they maintain the property well on paper they'll make a tax loss most years, ensuring zero tax and minimising CGT. Not declaring the income when CGT will have to declared is just stupid, at which point the taxman will take them to the cleaners and I'll bet they'll have no receipts to prove anything.

Share this post


Link to post
Share on other sites

My parents have an inherited hse in Greater London that they let out. They are in their late 80s so I help with their tax return. In there situation I can't see how you can make a loss - especially as you can't claim for improvements only repairs. The same tenant has been there 5 years and the only expenses are building insurance and gas cert .

In recent times the hse has had double glazed windows and a new boiler installed.

The tenant pays well under market level and does general decorating themselves . My parents pay tax of around £2k pa on this property.

NB . They think the current housing situation is ridiculous. In their opinion a average working couple should be able to buy a modest hse for their family.

Share this post


Link to post
Share on other sites

Well it just goes to show the unwritten rules of the UK landlordism.

Form planning, to laws and tax collection.

I tend to agree with your view but the word on the Street is that the first big data 'win' will be a clear up on BTL just waiting to get the election out of the way

As another op said hard to show a loss and billions are collected by millions of thousands bills,not millions by hundreds of thousands of CGT bills.

Also I understand that contrary to our view on here only 20% of MPs have BTL portfolios so 80% haven't got any skin in the game and natural opposition

Share this post


Link to post
Share on other sites

Tax is a mugs game, especially if your are one of the 960000 who have a Get out of Jail Free card. Wonder how many MPs are on that special list.

Share this post


Link to post
Share on other sites

My parents have an inherited hse in Greater London that they let out. They are in their late 80s so I help with their tax return. In there situation I can't see how you can make a loss - especially as you can't claim for improvements only repairs. The same tenant has been there 5 years and the only expenses are building insurance and gas cert .

In recent times the hse has had double glazed windows and a new boiler installed.

The tenant pays well under market level and does general decorating themselves . My parents pay tax of around £2k pa on this property.

NB . They think the current housing situation is ridiculous. In their opinion a average working couple should be able to buy a modest hse for their family.

Are you an accountant?

There is far more you could be claiming for a good accountant I'm sure would ensure that tax liability came down, especially if you keep all receipts.

Share this post


Link to post
Share on other sites

HuH?

If you depreciate, you crystalize all this at Sale.

Other fees are claimable with invoice.

Utility Bills?

Sounds to me your scenario for a BTL tax return will end up sending them to prison.

You could probably claim a portion of your own utility bills (inc council tax and your own home insurance) if you have a home office from which you run your BTL business.

Share this post


Link to post
Share on other sites

You could probably claim a portion of your own utility bills (inc council tax and your own home insurance) if you have a home office from which you run your BTL business.

exclusively used for such a purpose, of course.

Share this post


Link to post
Share on other sites

HuH?

If you depreciate, you crystalize all this at Sale.

Other fees are claimable with invoice.

Utility Bills?

Sounds to me your scenario for a BTL tax return will end up sending them to prison.

Depreciation - In terms of any rent income being charged in depreciation or paid in interest. Aside from the basic nonsense because land doesn't depreciate, just the house, and most cost is land not buildings, it's crystalised 1) Only if you sell 2) Only if you sell with a taxable gain, which is avoidable. An example:

"Arthur bought a flat in South London for £100,000 in the year 2000 and sold it in Jaunary 2010 for £223,000. This means he made a gain of £123,000. He lived in the property for the first three years and then rented it out for the remaining seven. For tax purposes, capital gains are assumed to have accrued equally throughout the period of ownership; therefore Arthur officially made gains of £12,300 per year. The capital gains which accrued during the first three years qualify for private residence relief, in addition to the gains which accrued during the final three years (because of the 36 month rule), so this shelters £73,800 from taxation.

This leaves £49,200 worth of gains which accrued during the first four years when the flat was rented out. Arthur can them claim letting relief, which would be worth £40,000 (because this is less than the amount of private residence relief which has already been claimed, £73,800, or the gains which occurred during the period under consideration, £49,200). This reduces the sum on which capital gains tax would be liable to just £9,200, but this liability can also be removed if Arthur has a wife or partner who can also claim her own £40,000 worth of letting relief; or if Arthur declares no other capital gains during this tax year, he can use his capital gains tax annual exemption, which was worth £10,100 during the 2009/10 tax year. Therefore, using entirely legal means he is able to avoid paying any capital gains tax, despite the size of the profit he made from selling his rental property." p.21 http://www.if.org.uk/wp-content/uploads/2013/11/Why-BTL-Equals-Big-Tax-Rip-off.pdf

Invoice - not sure what you mean. I'm not arguing that evasion is ok, but that avoidance when transferred to legit won't necessarily result in much greater hmrc revenue.

Utility Bills - if a landlord decides to pay the bills/council tax themselves and tack that onto rent, it's a deductable.

Prison - perhaps a few, but mostly completely legit.

Making a loss (another poster) - the example above was an inherited house. Not so hard to do on an interest only mortgage.

Share this post


Link to post
Share on other sites

Well, it doesn't take a genius to see the hypocracy of someone expressing outrage at the housing situation when they hoard multiple houses themselves.

It's not hypocrisy at all. You can't buck the system, that's all.

Share this post


Link to post
Share on other sites

Receipts - what receipts ? As mentioned only gas cert and insurance relevant. Not an accountant but have been self employed (for 25 yrs) and also had limited company.

10% wear and tear allowance claimed

Share this post


Link to post
Share on other sites

Receipts - what receipts ? As mentioned only gas cert and insurance relevant. Not an accountant but have been self employed (for 25 yrs) and also had limited company.

10% wear and tear allowance claimed

don't forget travel expenses to meet tenant and ensure any repairs needed are reported and attended to. Do you not make regular inspections? There may be other journeys directly related to the Land and Property business.

As your claiming 10% wear and tear allowance the property is furnished, its amazing how repairs and replacements mount up. Especially as tenants treat their landlords property with such little respect! (Not my experience mind, only going by what posters on this forum say :D .)

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   211 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.