NO LET OFF FROM HMRC ON RENTAL INCOME

October 2, 2013

As the Coalition Government has sought to do everything in its power to bring down the country’s budget deficit, it has come up with a wide range of scheme to maximise the amount of money coming into its rather empty coffers.

One of its more effective ways of doing this has been to task HMRC with the job of going after the tax receipts it believes could be owed by individuals or companies operating in particular market sectors.
To do this, the taxman has formed a number of task forces which focus on specific industries in specific geographic areas, with the newest ones covering London’s construction and security industries, and second-hand car dealers in the Midlands.

In the north east, the residential property sector has been a particular target, with a dedicated task force swinging into action in the region during summer 2012 and new measures designed to recoup undeclared profits on the sale of second homes being introduced earlier this year.

The boom in Buy-To-Let mortgages over the past decade, and the signs of its resurgence in recent months makes this potentially a very good hunting ground for HMRC, and the latest stage of its continuing drive came last month with the launch of a new Let Property campaign.
This aims to encourage landlords letting out properties to large groups such as students, for multiple occupation or as holiday accommodation to come forward and voluntarily disclose any undeclared rental income before the taxman comes looking for it.

HMRC and The Treasury estimate that around 1.5m landlords across the UK might have underpaid or failed to pay what they owe on their income, a tax shortfall which amounts to what could be a very welcome £500m a year.

HMRC’s primary message of ‘it’ll be cheaper to come to us before we come to you’ very much holds true, especially as their investigations can cost a great deal in terms of time, money and inconvenience.

An 18 month amnesty has been introduced as part of the Let Property campaign, meaning those who make a voluntary disclosure are likely to receive a lower penalty compared to those whom HMRC approaches directly, and anyone who thinks they might be targeted by it would be well advised to take proactive steps towards properly organising their tax situations.

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