HMRC investigating rental income
Landlords may not realise thet owe income tax warns DTE
Monday, 12, May 2008 04:10
Hefty fines could be in store for buy-to-let landlords who believe they do not owe income tax because their rent revenue is being swallowed up by mortgage payments, an accountancy firm has warned.
DTE says buy-to-let investors are being targeted by a fresh HM Revenue & Customs (HMRC) campaign against landlords who have not declared rent on their tax returns.
Alan McCann, a director of tax at business advisers DTE, says HMRC believes the campaign will generate significant arrears from unsuspecting taxpayers.
"HMRC is confident of success because information from stamp duty land tax returns means it can match properties to individuals' declared principal private residences and take matters from there," he said.
The campaign is initially a pilot exercise with an option to launch a major campaign depending on results.
HMRC sent a first batch of letters in February to people who complete Self Assessment Tax Returns but have not declared rental income on previous returns.
The letters are not formal enquiries and there is no legal obligation to respond. But if no reply is received in the usual 30-day period, a reminder will be issued and if there is no response to this, HMRC will consider a formal inquiry.
Mr McCann said: "If there is a tax arrears issue, coming forward with a voluntary disclosure could reduce any penalties."
He also warned that if a property was bought entirely or partly by funds from other asset sales buy-to-let landlords should consider whether there may be any additional capital gains tax issues.