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A prominent tax consultancy says landlords who transferred their rental properties in a company in 2017/18 are being targeted by HMRC.
It’s the Revenue’s latest campaign to ensure all tax liabilities are correctly reported, says Blick Rothenberg.
Heather Powell, a partner and Head of Property and Construction says: “Landlords who incorporated their property business but have not reported a capital gain on their 2017/18 self-assessment tax return are being sent a ‘nudge letter. Incorporating a property business is an integral element of many of the schemes marketed to landlords significantly impacted by the restriction of interest when calculating the income tax payable on rents received from properties held personally.”
Blick Rothenberg says the nudge letters ask the tax payer to check they have correctly calculated the tax relief available to them, gives references to specific HMRC Guidance on technical areas and reliefs available, and gives the tax payer 30 days to reply.
If the tax payer does not reply the next step may be a tax enquiry, and the issuing of a discovery assessment by HMRC.
Any landlord who receives a nudge letter should reach out to their tax advisors immediately.
Powell adds: “I would also recommend that those who have transferred their properties since 2017/18 to a company should take steps to review the ensure that they have correctly reported any capital gain that was realised on the transfer, as I expect that they will be the next recipients of an HMRC nudge letter.”
HMRC took the unusual step of issuing a warning in October about a scheme involving a hybrid business model - a partnership and a company - that in their view the scheme does not work, and that any landlords who had used the scheme were advised to withdraw from the scheme and settle their tax affairs.
The nudge letters currently being issued are not as emphatic in stating that UK taxes are payable but give a very good indication that HMRC believe buy to let landlords may be under declaring taxes due, and that they have them ‘in their sights’.
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Sounds about right. Target landlords pensions but let multi national corporations get away with it.
It is easier to target landlords as they are small fries. Hmrc may not get anything extra or get £50 to £100 extra and believe job well done but they do not have a reach of multinational corporates to get millions from them. Maybe Hmrc do not have expertise in going after large multinationals tax advisers.
Low hanging fruit
I bought most of my properties prior to S24 being announced, and on discussion with accountants was advised not to move them to a limited company, because I'd have to pay stamp duty and capital gains, so would probably not be worth it. Basically you would be selling the properties to the company. Since then I have seen various people stating this can be done without paying those taxes, but I remain sceptical. Now looks like it's coming home to roost. I don't agree with Section 24, but I don't agree with tax evasion either. Taxes do pay for the NHS and other public services, although clearly too much being spent on benefits for the work shy.
Tax avoidance and Tax Evasion is another thing altogether but a fair playing field apparently is completely out of the question when it comes to the tax affairs of landlords after the removal of tax relief on mortgages and changes to wear and tear, we are paying beyond that of any other business type.
My accountant was explaining to me that every second or third year expect a letter asking for a review of previous years. Three times I have been checked (maybe working abroad?) in total, over the nine years in three separate checks a phone bill was found to be over claimed.
As mentioned above low hanging fruit...
Always going for the little man , too lazy and incompetent to take on the big guys …. As usual
Would be nice if there was some kind of organisation to represent Landlords, you know one where you pay a modest annual fee to promote our interests...you could give it a catchy name say National Residential Landlords Association and they could campaign for us.....
What a novel idea, John.
My membership of a similar orgganisation has just autorenewed, but unless Ben Beadle shows more vim and vigour in 2024, it will not be renewed next year. I want the NRLA to come out fighting for landlords. not just crack open the champagne because of a minor victory over student lets.
I guess it's much harder to tackle the big companies with their top lawyers and accountants working the system to their advantage. Much easier to go after the simple operators.
The article refers to a very specific group of landlords - those who incorporated existing portfolios in 2017/18.
How many people is that exactly?
How many of that group incorporated in a way HMRC may now have issues with?
Where did they obtain advice?
Had the more questionable schemes been invented by then?
I was under the impression they had been modified somewhat in the intervening years.
Small scale landlords and their tenants have been very badly failed by this government regarding taxation.
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