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Taxman Cracks Down On Landlords

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Buy-to-let property investors who are not declaring their rental income could be getting a letter from the taxman soon, accountants have warned.

HM Revenue & Customs (HMRC) is targeting people who receive income from UK property in a bid to chase non-payment of tax.

Its compliance unit is writing to 500 self-assessment taxpayers who they believe are receiving income from rental properties -- but are not declaring it.

It is expected to be the first move to clamp down on unpaid taxes on buy-to-let properties.

"Over the last few years, HMRC has geared itself towards tackling tax evasion and avoidance and it intends to use the information it has to seek out evaders in a systematic fashion across the board," says John Cassidy, tax investigations partner at chartered accountant PKF.

"Those who ... believe they may have escaped the Revenue's grasp should note that this is only a pilot exercise for ongoing interventions that will start later this year."

The campaign is the latest in a string of moves designed to avoid lengthy, traditional tax investigations.

Last summer the taxman wrote to 200,000 people urging them to come clean over any unpaid taxes on offshore accounts.

That came little over a week before the deadline of a tax "amnesty", allowing people with offshore accounts and overseas property to disclose income and gains not previously put on their tax returns -- without being hit by hefty penalties.

Now it is using government data, including stamp duty receipts, to pinpoint individuals who might be letting properties, but are not declaring rental income on their self assessment tax returns.

"Occasionally there will be legitimate reasons why tax has not been declared," says Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants.

"In some cases, letting out property does not raise much income, and people may feel they are not making a profit which needs to be declared.

"But tax rules for renting out property are confusing. The amount of tax payable depends on the type of letting -- even letting all or part of a property can be taxed, usually the net profit received."

The taxman is asking for details of income and expenses relating to rental income from British property for the six years up to April 5 last year.

Those who have not kept scrupulous records -- including buy-to-let mortgage statements -- could run into trouble.

PKF's Cassidy urges those who receive one of these "intervention" letters to take urgent action, even if they have not made profits on their letting.

"While HMRC cannot be certain these individuals have made profits and there is no legal requirement to respond to such letters, ignoring such a letter may be counter-productive," he says.

"Once HMRC has identified a tax risk, it is unlikely to let go until the issue is cleared up."

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Of course according to you lot all BTL investors are subsidsing their tenants so should generate a tax loss.

do you need to fill in a return if you break even or make a loss?

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do you need to fill in a return if you break even or make a loss?

Yes, you should fill out a return - you can then carry the loss forwards to the next tax year and count it against future profits. You can't count the loss against your earnt income or capital gains however because HMRC treats rental interest as "investment" income, much like a share dividend. Losses can only be counted against future income from rents.

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Yes, you should fill out a return - you can then carry the loss forwards to the next tax year and count it against future profits. You can't count the loss against your earnt income or capital gains however because HMRC treats rental interest as "investment" income, much like a share dividend. Losses can only be counted against future income from rents.

Is the tax you pay on profit fixed for all landlords or does it depend on what tax bracket you are in?

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  • 295 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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