Half of landlords in one London borough fail to declare rental income

[goldbug9999]

50 minutes ago, Richmond said:

True, if they focus resource onto it they can probably move a lot faster. Though I bet the amount of cash from a single IR35 will be a lot more than your ametuer one property landlord. Esp those 'loans' people paid themselves with.

IR35 has nothing to do with the tax avoidance scheme legislation. 

[Richmond]

1 minute ago, goldbug9999 said:

IR35 has nothing to do with the tax avoidance scheme legislation. 

Yes, quite right! Still, I guess the amount of tax due for falling foul of IR35 has, historically at least, been a lot more than a landlord with a single BTL.

[Si1]

11 minutes ago, Richmond said:

I am not suggesting they let them out to carry on evading. But I assume a prosecution is likely to cause them to lose whatever job they are doing and possibly fall back on the state for benefits and if they get a custodial, there is the cost of having them sit in prison, followed by benefits again. So they get the one off shot of cash, but over the long term this could be self defeating (unless the cash they get is significant). Better they go back to their job and lives and continue to pay into the system (unlikely to evade again). Esp if we are taking about 1m taxpayers. Plus those setting the rules don't want to 'accidently' fall foul and get stung themselves.

Prosecution is probably only done sparingly to send a message to anyone thinking of evading.

They may treat it as a ruthless ROI equation, true, so I think the biggest debtors will indeed pay, and the more mild ones may get mildly slapped.

[Venger]

13 minutes ago, Richmond said:

I am not suggesting they let them out to carry on evading. But I assume a prosecution is likely to cause them to lose whatever job they are doing and possibly fall back on the state for benefits and if they get a custodial, there is the cost of having them sit in prison, followed by benefits again. So they get the one off shot of cash, but over the long term this could be self defeating (unless the cash they get is significant). Better they go back to their job and lives and continue to pay into the system (unlikely to evade again). Esp if we are taking about 1m taxpayers. Plus those setting the rules don't want to 'accidently' fall foul and get stung themselves.

Prosecution is probably only done sparingly to send a message to anyone thinking of evading.

 

Well according to many here, BTL is a business.  Many BTLers are in it full-time as well without real 'jobs'.

Simple rules to follow for getting tax right in BTL.  Whole load of professional advisors including accountants and tax specialists (which need paying for advice/accounts).

How would they do that?  (Because they are BTLers as well?)

HMRC's 'Let' campaign has run for ages and extended over and over again... although I only read a Chartered Tax Accountant's article setting out how to do it carefully, to best qualify just for tax and penalties.

https://letproperty.campaign.gov.uk/

In other businesses there are penalties for not paying tax.   Why is BTL so special for you?  Because the BTLers are special people who are innocents?  Real people who matter more than other people?   Real businesses have to pay for professional advice... incur costs, be compliant in so many many ways, else risk many downside risks.  Renter-savers have to play it straight, and pay up to your special ones... and are at risk of no pensions/no homeownership future (bubble, including where my landlord owns 5 BTLers worth £millions).   Yet got to think of special measures to protect BTL tax-dodgers??????  **** that.

 

Quote

 

This case flows from Anti Money Laundering legislation and the Proceeds of Crime Act.

There is a now a thing dividing line between Tax Evasion (Not avoidance, note) being subject to a Civil Penalty and a Criminal Offence.

Same with VAT.

Purposive Tax Evasion (i.e. not genuine mistake or error) of significance (And presently £5k is of significance) means all and any assets gained via Money Laundering automatically qualify as a Crime.

Whilst HMRC could no doubt spend time and investigation, to prove how each property purchased was achieved by undeclared income (Evasion) why bother?

They can (And do) resort to POCA to take the lot, in penalty.

(Because of my professional practice, I am necessarily regulated and compliant to AML and POCA).

 

 

Quote

 

Let's set the record straight here............

If a taxpayer is squeaky clean, then they can easily defend themselves by producing records which stack up.

The Revenue's stance on investigation for over 25 years has been assessment and then "Prove us wrong!"

A taxpayer (Let us assume Schedule E: i.e. PAYE) who enjoys another income from property and repeatedly fails to declare this on their tax return is wholly unable to defend themselves: "Didn't know I had to Guv!"

Ignorance of the law is no excuse. Consult a professional.

If and when one commences a new or additional business activity, which falls to tax under Self Assessment (Any case) then one has Six Months to advise HMRC.

Not exactly rocket science is it?

As a further matter of interest, if clients of my practice are unfairly accused or assessed, then we hand the client over to a top ten practice: who win every time and charge HMRC for their fees.

Unless, naturally, the client is a lying tax evading worm: then they wouldn't be a client!

 

 

 

[Richmond]

3 minutes ago, Venger said:

 

Well according to many here, BTL is a business.  Many BTLers are in it full-time as well without real 'jobs'.

Simple rules to follow for getting tax right in BTL.  Whole load of professional advisors including accountants and tax specialists (which need paying for advice/accounts).

How would they do that?  (Because they are BTLers as well?)

HMRC's 'Let' campaign has run for ages and extended over and over again... although I only read a Chartered Tax Accountant's article setting out how to do it carefully, to best qualify just for tax and penalties.

https://letproperty.campaign.gov.uk/

In other businesses there are penalties for not paying tax.   Why is BTL so special for you?  Because the BTLers are special people who are innocents?  Real people who matter more than other people?   Real businesses have to pay for professional advice... incur costs, be compliant in so many many ways, else risk many downside risks.  Renter-savers have to play it straight, and pay up to your special ones... and are at risk of no pensions/no homeownership future (bubble, including where my landlord owns 5 BTLers worth £millions).   Yet got to think of special measures to protect BTL tax-dodgers??????  **** that.

 

 

 

 

I never said they shouldn't be hit with penalties or with prosecution. But the numbers suggest that while some may be getting the former (penalties) they are not being prosecuted. And I am speculating as to why. There is a ROI that needs to be considered, court cases and locking up millions of people is unlikely to be the most productive approach. Prosecuting someone who owes £50 tax is also unlikely to be a worthwhile investment - other than as a showcase to discourage others from doing it. So you hit them hard with penalties and claw back the tax, but let them fly free again to continue to be productive members of society (rather than unemployable criminals). Just cherry pick a few big offenders and a random sample of others and prosecute them - to get the message and fear out. I think this is pretty much what your quotes say.

[Venger]

It doesn't really matter so much....

Difference between BTL taxation for past 17+ years vs April 2017 (2022 especially) is like difference between night and day.

Under the tax-system to April 2017, many BTLers have been able to organise (from free-will) their financial affairs so that by laying claim to ever more properties, they keep their tax-bills down / low / non-existent (all okay under the then rules).

I mean look here... below....

Taxable Income £0  

"That's how it should be innit"   grrrrrr

(happy dayz / mad-gainz...... loadsa houses worth £millionz... farming rent for decades of tenants vs mad-HPI... priced out renter-savers and me with loads and loads and loads of properties.... more and more for decades)

Into the Pincer... S24/CGT / early repayment fees  (Although maybe he will escape it with a dash to go live in Malta... so many other BTLers who wont)

  

Mad-gainz MEW, moar properties to rent out.  Pathetic income but 50 houses.  Or even 50+ houses worth £7m over 20 years, loads of equity but loads of debt.

It all changes under Section24 / CGT new rules.  (Although it's a wait... when it begins to happen, markets may move sharply).   Although expecting all the special plight innocence for the BTLers, vs the reality of them needing their financial faces ripped off... the greedy ones).

"Can't tax them... providing homes... cost more in benefits etc if they have to sell up all these houses they've laid claim to, and their own homes.... they matter more than tenants."  ..... Nonsense.

On 29/03/2017 at 7:26 PM, Venger said:

Everything changes under S24.  

How many examples do I have to put up of BTLers who have structured their finances so there is legitimately no tax to pay.... or very little tax to pay, under today's rules.

We have those who believe very few BTLers pay tax now, and are all ahead of HMRC and that they will remain so.... 

And those who believe everything changes with S24 for so many BTLers and the properties they have laid claim to.

It's like day vs night in policy change and impact.

Grateful to The Exile for sending me this link, no matter that we're in disagreement about many matters re BTL/S24/Tenant 'impact'/Bank Systematic Solvency in HPC / S24 / why S24 eventually was brought in...... late is better than never, after BTLers have doubled down into it imo.

http://www.propertytribes.com/incorporation-investment-value-cgt-t-127628946.html

I recalled reading more about the thread starter a while ago.  He seemed to be very confident with his 'strategy'.  Although I can't find the main post that I was thinking of.

 

On 29/03/2017 at 5:40 PM, Bland Unsight said:

Very possible.

And therefore the obligation to grass up your landlord falls to you, kibuc.

I rather like the idea of HPC gradually ending up as a cadre of knowledgeable renters blowing up non-declaring landlords one at at time by tipping off HMRC. 

This is one of the more delightful aspects of section 24. As we've noted previously, without it there may well have been very little tax revenue for HMRC to chase from these leveraged portfolio types. With it, landlords have to declare to get the relief at basic rate and if they don't declare then once fines are considered the non-declaring landlords turn into a real gold mine.

 

On 30/03/2017 at 7:59 AM, Venger said:

Tenants paying the rent in no-trail cash.....?

Even on lower-end place, that's a lot of cash for tenants handle, walk around with, to kick up to the BTLers.  

Middle ending type house and it's fortunes of cash to have to handle... tenant side to the kicking up to the landlord.

Section 24.

The authorities know.  They are plugged in.

 

BTLers/LLs spent 2 years trying to overthrow Section 24, for they know it's not a tenant tax, but where they have less favourable tax treatment.

 

 

Section 24... the clock is ticking BTLers....

 

 

Section 24 is days away... BTLers.  

HMRC's knows...  they know just about everything.

 Connect, and all the agents with it, are okay-to-go.

 

 

 

 

On 30/03/2017 at 7:59 AM, Bland Unsight said:

It also completely ignores the realities of revised BTL underwriting rules. How are you going to refinance your mortgages if you can't show rental receipts on your bank account? If someone just had tens of thousands of pounds of cash turning up which they claimed were rent then it would ring Know Your Customer alarm bells and other protections against money laundering. Which major lender is going to risk being complicit in money laundering for the tiny returns they make on a £150k BTL mortgage lent to a muppet?

If you can't refinance your lending you're going onto the SVR which may be twice the best 2 year fix rate available in the market. The cost of not declaring that results from shutting yourself off from cheapeer finance far exceeds the taxation expense. That was also true before section 24.

I accept that there are a lot of amateur landlords not declaring income from let property. I do not accept that there are a lot of London landlords who are requiring rent to be paid cash in hand.

These amateur are leaving an audit trail which HMRC will be able to see from space. Someone ought to FOI the money being raised by the HMRC let property campaign (which appears to be a permanent 'campaign', or to put it more plainly, a shift in policy).

 

On 30/03/2017 at 9:40 AM, Venger said:

We have Section 24.  It's a really significant change.  Many a landlord have legitimately arranged their affairs to pay no/limited tax pre S24.

This landlord (so many of them share same/similar names... millions of landlords) picked up somewhere by the system.  If they can be picked up for breaches like this, they can be picked up for taxation.  Easy to find.   They are not way ahead of HMRC.  And Section 24 changes everything.  .......

 

On 31/03/2017 at 5:01 PM, spyguy said:

LLs are expected to sign up t to the electronic tax thingy, ad pay the tax due every quarter.

HMRC will treat them like a small business i.e. gloves off.

 

On 31/03/2017 at 5:07 PM, CunningPlan said:

It doesn't seem to get much press but the change in date of payment of CGT kicks in this December. I think that will be a bit of a wake up call for many.

 

On 31/03/2017 at 10:22 PM, mrtickle said:

Yes, as I covered in this post

Let's try to get a timetable that we can update. It's been a long wait already...

1st (almost) Year - Summer Budget 2015 until April 2016.

2nd year - April 2016 - April 2017. 100%/0%. Bill lands in Jan 2018.

3rd year - April 2017 - April 2018. 75%/25%. Bill doesn't land until Jan 2019.
Also: From Dec 2017 CGT has to be paid within 30 days, instead of 18 months.

4th year - April 2018 - April 2019. 50%/50%. Bill doesn't land until Jan 2020. But: move to electronic and quarterly tax settlements if pay NIC class 4 and turnover is above the VAT threshold. So - bill much earlier?

5th year - April 2019 - April 2020. 25%/75%. Bill doesn't land until Jan 2021. But: move to electronic and quarterly tax settlements if pay NIC class 4 and turnover is below the VAT threshold. So - bill much earlier?

6th year - April 2020 - April 2021. The first year of full implementation of the new rules. Bill doesn't land until Jan 2022.
Summer Budget 2015 -> 2021 = five and a half years.
 

 

On 11/12/2016 at 1:13 AM, Nabby81 said:

Well they want pity then they appear in articles like this and show their figures and expect people to feel sorry for them ...2.4mil worth of property on a 34k salary 

Guy with loads of houses rented out, sad face in The Guardian. ^   His specialness as landlord 'owning' so many homes (with mad BTL levels of debt), providing homes, and tax position being non existant in early 2015 because of how he had structured his financial affairs for claims on property to extreme.... to feed on rent/buy more houses with debt.   All that equity is there for HMRC to eat into.  Pincer.

On 02/04/2017 at 0:30 PM, Bland Unsight said:

The boy Price is on there keeping it real.

Here's a gem from him on PovertyLater

"Tax on profit is a legitimate business expense". Let that sink in. Revel in the idiocy. Savour it.

Conventionally INCOME - EXPENSES = PROFITS and then PROFITS - TAX = PROFITS AFTER TAX

I accept that these poor dears are getting a bit confused with all the GAAP crap they like to spout and it's understandable for them to seek to contest the government's determination that their mortgage interest is not an allowable expense for the purposes of calculating their profit chargeable to tax.

However, stating that "tax on profits is a legitimate business expense" shows that you don't understand even the most elementary accounting concepts. 

 

 

On 04/04/2017 at 9:25 AM, Lavalas said:

'There are huge risks involved' said Mr Leydon

Yeah, and you manage risk, not just crack on borrowing and mewing as much as possible until you 'own' 50 houses.

Risks are risky because they can happen. 

It happened

 

On 05/04/2017 at 0:21 AM, Bland Unsight said:

I wish I was pushing 40, those glorious days of youthful vigour are all in the past. And yes, renting. The shame of it. Being admonished for renting by a landlord. I haven't slept since.

When I think how many mortgages some of those housing heroes have signed up for I fall to pieces with shame that I haven't even got one. The funny thing is, I haven't been called jealous for a long time. That used to be the first word out of their ignorant mouths. Maybe they realise that all that mortgage debt wasn't such a brilliant idea after all. 

 

On 05/04/2017 at 7:19 PM, Bland Unsight said:

The last Muppet Commader to mock us and make out that he knew what he was doing is now in Malta praying that the taxman sees matters the same way as he does and that his lenders overlook or remain unaware of all the BICT jiggery-pokery.

At least Busta had the sense to do something other than pretend he could single-handedly buck the rental market (though the £2,000 book idea never really worked out).

Sell now, sell everything.

 

 

[Ah-so]

5 hours ago, frankief said:

http://www.channel4.com/programmes/catching-the-tax-dodgers

New series just happens to be starting tonight.

I watched it. Most enjoyable. 

The attitude of Richard Hillgate and his wife for VAT evasion was pretty much what I souks expect to see from a BT landlord. Why are they picking on me? Thru should be after Amazon. The money was only resting on my account etc. As though evasion of £97,000 was nothing that anyone should make any fuss over. 

[Venger]

10 hours ago, Richmond said:

I am not suggesting they let them out to carry on evading. But I assume a prosecution is likely to cause them to lose whatever job they are doing and possibly fall back on the state for benefits and if they get a custodial, there is the cost of having them sit in prison, followed by benefits again. So they get the one off shot of cash, but over the long term this could be self defeating (unless the cash they get is significant). Better they go back to their job and lives and continue to pay into the system (unlikely to evade again). Esp if we are taking about 1m taxpayers. Plus those setting the rules don't want to 'accidently' fall foul and get stung themselves.

Prosecution is probably only done sparingly to send a message to anyone thinking of evading.

 

9 hours ago, Richmond said:

I never said they shouldn't be hit with penalties or with prosecution. But the numbers suggest that while some may be getting the former (penalties) they are not being prosecuted. And I am speculating as to why. There is a ROI that needs to be considered, court cases and locking up millions of people is unlikely to be the most productive approach. Prosecuting someone who owes £50 tax is also unlikely to be a worthwhile investment - other than as a showcase to discourage others from doing it. So you hit them hard with penalties and claw back the tax, but let them fly free again to continue to be productive members of society (rather than unemployable criminals). Just cherry pick a few big offenders and a random sample of others and prosecute them - to get the message and fear out. I think this is pretty much what your quotes say.

I don't think anyone is suggesting the BTLers should be prosecuted for £50.

You're also looking backwards (about prosecutions for BTL tax evaders), where I am looking forwards, into Section 24.

If the evasion is very significant (£5K+) I hold they (BTLers) should be/will be prosecuted (no 'make an example of and forgive all other BTLers' - but as per the circumstances of each BTLer individual). 

Tax repay, penalties, and whether a prosecution should proceed (amount evaded).   It's only likely to be significant with S24 next few years.  (Some BTLers may have evaded big tax for many years, but S24 is the real change.)  

The HMRC 'Let' campaign has been running for years, where they could pay the tax-owed and penalties.  There are no excuses.  They are landlords to tenants.  And in so many instances, tenants who are priced out of the market, and who the BTLers have created the demand they pretend to service, by way of buying up loads of properties to rent out.  Including when tenants were still at school.... 20+ years ago, when the BTLers began buying up house after house.   You listen to that radio segment by Busta, spending weekends on newbuild estates in early 2000s buying up family home after family home?

Without  tax evasion by BTLer many tenants may just have had a better shot at becoming homeowners at lower prices.  And what about all the rent paid up to those tax evading BTLers, by the tenants?  

Those BTLers prosecuted also create jobs (in a way) by allowing other people - honest people - to take their positions.  So sad, too bad... BTLers... owners/claims on multiple homes in a supply and affordability crisis for the young.  

It might not be BTLers on to benefits... just less of the Range Rover lifestyle and having to downsize to a terrace, from life of mansion and 5+ BTLs.  Too bad.   And benefits are not going to be all so easy to claim... sign-on.  Whatever costs are, they will be worth it.... to get the tax-evading/societally destructive BTLers out of the way.

BTLers as 'productive members of society'..... 

Recessions/Depressions/ Market downsides...

Quote

 

They do have some positive results, however, in releasing energies from the businesses they destroy. 

With no depression, we might have had a large leather business in Stratford and a bigger bookshop in Lichfield, but no Hamlet and no Johnson’s Dictionary.

 

Anyway Section 24 is here and the pincer is in.  As many of us expected it would.   And that's where the tax-revenue money is.   Then you/we can reassess prosecutions going forwards, from night to day in terms of BTLer tax treatment.... and so many BTLers who will find the income tax they owe balloons / others having to find big CGT if try to sell.

Income tax & Captial Gains tax (for those who need to sell.... with so many BTLers having MEWed it already (on the HPI) to buy moar houses.  

Section 24 perfection.   Such beautiful complexity.

Quote

He began the slow move that was defeat and victory together before he even knew it himself. Nothing
so subtle, so complex, so beautiful had ever been seen on an Azad board. He believed that; he knew
that. He would make it the truth.

- The Player of Games

 

Quote

Venger 2014-2015:  'Gents, we are not in disarray! We are falling back. And all the time, their supply lines get longer. The BTLers must be taken to the point where they start to think about pulling back, then present them with the possibility - the seeming possibility - of a knock-out blow.   But it won't knock us out - it knocks them out.'

 

Quote

This is one of the more delightful aspects of section 24.

As we've noted previously, without it there may well have been very little tax revenue for HMRC to chase from these leveraged portfolio types.

With it, landlords have to declare to get the relief at basic rate and if they don't declare then once fines are considered the non-declaring landlords turn into a real gold mine.

HMRC knows enough.  Just been a matter of allowing the BTLers to double down into it, on their quest to buy up all the homes to farm 'Generation Rent Forever'.

S24 (2017-2022)....  and suddenly what they were offsetting in BTL mortgage debt, is taxable - basic tax relief.  And so many BTLers went for the knockout blow.  BTL debt galore on multiple houses, at ever higher prices.  Hello S24/CGT pincer.

Edited August 15, 2017 by Venger

[spyguy]

23 hours ago, LittlePig said:

either by #1. lack of will (not enough money in it) or #2. lack of tools.

Let us see what time will bring. In the mean time I am writing to my MP (again). They love me...

Neither.

Io btl could offset rent agsinst mortgage irs - net tax due 0.

Everythings changed now.

BR or Higher rate tax payer is due to pay several 1000s on a 800/m rent.

[spyguy]

11 hours ago, Si1 said:

They may treat it as a ruthless ROI equation, true, so I think the biggest debtors will indeed pay, and the more mild ones may get mildly slapped.

Sortof.

Biggies will pay owed tax and karge fine.

Smallies owed tax and small fine.

Hmrc will get the tax due.

[oatbake]

I'm surprised that lenders are not taking more of an interest in this. Surely it could result in HMRC taking a charge against mortgaged property if tax is due and I'm sure that HMRC's charge would trump the lenders in the event of a default/repossession...