Landlords Face Closer Scrutiny From HMRC

Landlords Face Closer Scrutiny From HMRC

HMRC Want Landlords
To Pay Up

Her Majesties Revenue and Customs (HMRC) are determined to hit private rental sector (PRS) landlords for as much tax as possible.

Over the past few months, HMRC inspectors have been closely scrutinising PRS landlord activity, focusing on any money generated by sales of buy-to-let properties that were purchased by property investors.

HMRC have created dedicated task forces in the Yorkshire and Humber region and in the South East of England to ensure property investors are not evading tax obligations.

HMRC have also been publicising a property sales campaign to try and round up property investors who have yet to declare income from the sale of rental properties, so if you are a property investor who has recently sold a rental property, (that has never been your main residence), you better hurry up and declare it to HMRC before 6th September 2013.

Property experts believe that the HMRC tax investigations are only the beginning of something much larger and many predict that HMRC intend to increase the severity of their investigations after the September 2013 deadline has passed.

HMRC tax investigators can be ruthless, once they suspect something is awry, they rarely let it go. Investigators use paper trails to track down landlords who have failed to declare rental income and by correlating information from Land Registry records and tax information held by lettings and property management agents; they find it simple to identify any interesting discrepancies.

As the current buy-to-let market continues to boom, it is highly likely that all PRS landlords will eventually come under the spotlight by HMRC tax inspectors, simply due to the revenues that are earned by landlords because the Government don’t want to miss out on any earning opportunity.

To avoid being penalised by HMRC, it is wise for all UK PRS landlords to be transparent in their tax affairs and should never try to evade paying tax, or they may end up paying the price.

HMRC’s annual revenue from buy-to-let income has increased by more than 10% this year because of the close attention they are giving PRS landlords, and the scrutiny is set to intensify.

HMRC expect buy-to-let property investors to hand over more than £2.5 Billion (GBP) in tax from rental income in 2012/13 up from the £2.02 Billion (GBP) paid in 2010/11, which was also an increase of 13% from £1.78 Billion (GBP) paid in 2009/10.

The increase in the amount of money HMRC receive from buy-to-let property investments and the rental income they produce is testament to the growing scrutiny of the sector.

Buy-to-let property investors need to be aware of the Government’s increasing frustration about tax avoidance by mega corporations, who get away with paying very little or even no taxes in the UK at all, as you may have already read about in the press.

To relieve this frustration the Government have instructed HMRC to investigate easier targets and PRS landlords are high on the hit list.

HMRC’s actions to date show that they are already capable of matching data from Land Registry records and verifying it against the tax information supplied by lettings and property management agents to look for financial discrepancies that they can query.

As the buy-to-let boom continues to grow, there will be more data and discrepancies for HMRC to investigate. Some landlords and property investors may not understand what their tax liabilities are or may not know how to calculate them properly, while some others may think that they are operating below HMRC’s radar. However HMRC are warning that they intend to come down hard on all tax owed by UK PRS landlords, regardless of whether they own just 1 rental property or have a large portfolio.

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