HMRC has contacted Landlord Today to draw attention to new guidance it has issued over a tax avoidance scheme aimed at landlords.
The scheme is marketed as a tax planning option available to individual property landlords to structure their property business - it’s sometimes referred to as a hybrid business model.
HMRC alleges that the scheme attempts to by-pass mortgage interest relief restrictions allowing increased deductions for mortgage interest, reduce the tax payable on profits generated by the property business, cut Capital Gains Tax payable when properties are sold, and reduce Inheritance Tax payable on death.
The Revenue says in the guidance: “HMRC’s view is that this scheme does not work. People who use these arrangements may have to pay more than the tax they tried to avoid as well as paying interest, penalties and high fees for using such schemes.”
The guidance is detailed and sets out how the arrangement claim to work, which involves setting up a limited company and an accompanying LLP.
But HMRC warns that this scheme does not work as the arrangements are primarily caught by a number of other existing tax measures, set out in the guidance.
The Revenue says any landlord who believes they are in this arrangement and wish to get out can contact HMRC for help.
And it states: “If you’re using this or similar schemes or arrangements, HMRC strongly advises you to withdraw from it and settle your tax affairs.”
You can see the guidance here.
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“Less tax for landlords” must be busy this morning!
Will their insurance scheme cover this as promised. I looked at it but in order to set it up cost too much money for me!
Cannot blame landlords for looking at all options.
OK, so the implications of this are that those landlords who have adopted this approach will now sell up as quickly as they can! Well done HMRC another Government own goal!
is it now a matter of time before those who have been taken in by this property 118 tax scheme start looking for either a refund of monies handed over for this unregulated advice ?, im sure the usual scumbag claims companies will also be doing the rounds any minute especially if this outfit have done the tens of millions of pounds worth of business they say they have , it wont just be the HMRC taking a predatory stance over the poor landlords , everyones gonna jump on this as usual...!
I don't think it is as simple as that. They got caught in a spider's web. There are at least 2 companies under scrutiny by HMRC that I know of, that other landlord sites have commented on and it does not look good.
Can you advise who they are please Williams
It is very unwise to try cheating HMRC, they know all the scams
The two mentioned are LT4L and Property 118.
This is what Property 118 say "Spotlight 63 – HMRC and Property118 Agree" on 11th October. Unfortunately this site doesn't allow me to post a link.
Surely HMRC should have examined this far more closely years ago. As soon as Section 24 was invented would have been a good time.
I paid for a consultation with Property 118 back in early 2019 and fortunately didn't take it any further.
I feel so sorry for all those people who got sucked into these schemes and are now potentially going to lose everything after having paid a fortune in fees.
It wasn’t clear and so many switching to Ltd’s which seemed to be the general advice but now there’s a problem maybe they were going to loose too much and gave the goal post a nudge, too much red tape.
Strange turn of phrase from HMRC ,
a balanced opinion of property118
with all the online activity surrounding the ethics and legalities of the property118 scheme im sure they thought their advice to all the landlords has been right, it certainly looked credible enough to us , the thing is ive approached qualified tax companies since and found firstly that property 118s scheme is extortionately priced for what the real tax companies are saying is vague and misguided advice which "may" leave us open to problems with the tax office in future years, we found the property 118 crowd to be nice enough but after all this we would be mad to do any business with them , we are sticking to the qualified tax company we found , happy to share of course if anyones interested. its all very confusing but at the end of the day its our futures in the balance .
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