Despite a severe lack of resources, the HMRC task force responsible for seeking out landlords that do not declare income from property, is gaining momentum in Cambridgeshire.
In the last few weeks, I have seen a couple of incidences where HMRC have given landlords a chance to declare all via their online disclosure process, in the hope that they can recover some of what they estimate to be £500m of unpaid tax. The Council of Mortgage Lenders suggest that there are more than 1.5 million buy-to-let mortgages in the UK, so the potential is significant.
The let property campaign cleverly uses other sources of data to select and then contact investors where a self-assessment record is not present, for example Council Tax records, Stamp Duty Land Tax returns, lending data and regular bankings.
In the examples I have personally seen in the past few weeks, the taxpayers have been naïve to the fact that they should have been declaring citing reasons such as HMRC’s website being misleading, professionals that help acquire properties not giving advice and negative cash flow suggesting that there was not any income to declare. Unfortunately ignorance is not a great defence and when it comes to taxation it certainly isn’t bliss.
I have written about the dangers of relying on the HMRC website before.
The latter reason of negative cash flow (expenses exceeding income) is a common one, but cash outflow does not always equal a tax allowable deduction. For example if you have a repayment mortgage (as opposed to an interest only loan) then you will be paying back capital. Only the cost of finance, i.e. the interest element is allowable for tax.
Also, making a loss is not a reason for not recording your property transactions on a Tax Return, as losses could come in handy in later years when you do turn a profit.
If you are worried about properly disclosing your property investment to HMRC, please give me a call on 01480 426500 for a free, no obligation consultation.
The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.
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