Let Property Campaign

14 June 2016

The let property campaign is an opportunity for landlords to come forward and declare any past undeclared rental profit voluntarily.

This campaign was initiated in autumn 2013 and since then HMRC have increased the intensity of their enquiry into landlords who have failed to disclose their rental profits.

HMRC are now looking at the land registry and lettings agents have been asked to provide HMRC with details of their landlords. HMRC are also monitoring individual’s bank accounts and profiles on social media to get as much information as they can. This means that landlords cannot stay off the radar forever.

You will need to fill out a notification form (DO1) to let HMRC know that you with to take advantage of the let property campaign. Once acknowledged by HMRC you will have three months to disclose the income that you had previously not told HMRC about using disclosure form (DO2) and to Pay the Tax due, however if you can’t afford to pay the total amount in one lump sum you could ask to spread your payments. It is likely that you may not have to pay any penalties or if you do these will be lower than they would have been if HMRC had found out themselves that you hadn’t declared your rental profits.

It is advisable to seek independent professional advice to assist you in working out the total rental income for each year that has not previously been declared to HMRC, you also need to calculate all the allowable expenses to work out your total profit for each year.

If your records are incomplete you would have to make your best estimate of the undisclosed income and expenses, you will need to keep record of your estimated calculations as HMRC may ask you to explain how you have calculated the profit figures.

TT Intelligence can help you with taking advantage of the let property campaign and bring your tax affairs up to date with minimum possible penalties please contact us or call us on 0203 039 3993.

HMRC targets private landlords

01 February 2016

HMRC’s targets private landlords

In the summer 2015 budget the Chancellor announced plans of a triple attack on private landlords.

  • 3% increase in SDLT better known as stamp duty on buy to lets or second homes.
  • Finance cost restriction
  • Capital gains tax (CGT) to be payable in 30 days.

Firstly, from April 2016 there will be an additional 3% charge above the current rates of SDLT on buy-to-let properties and second homes, broadly if you already own one residential property additional residential property purchases will be subject to the additional charge.

This change affects both private and corporate landlords and there are many traps that could inadvertently trigger the charge. One such trap is that spouses and civil partners are deemed to be acquiring property jointly even if they are not, meaning if your spouse owns a residential property and you do not, then your acquisition of 100% interest in your first residential property will be subject to the additional charge.

Secondly, from April 2017 HMRC are introducing the finance cost restrictions which is targeting higher rate tax relief for residential landlords mortgage interest and interest on loans. This is a fundamental change to the principle of turnover – expenses = profits as the finance costs which are major expenses of most landlords will not deductible, instead a reduction to their tax bill of 20% of the finance costs will be granted if certain conditions are met.

Landlords therefore are taxed before the deduction of their finance expenses which could have a devastating effect on the investments of the individuals who have invested in the UK’s housing market.

The restrictions are to come into effect from April 2017 and it will be phased in over four years. Although HMRC may argue that this doesn’t affect the individuals in the basic tax bracket when we look at the way it’s calculated we can see it actually does as it can potentially push an individual’s income over the basic tax rate threshold.

Examples of how the finance cost restrictions effects individual landlords are as follows:

If we assume the mortgage facts below;

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This example is based on 2016/17 Tax Table with the current personal allowance and basic tax rate threshold.

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The third change that was announced was the reduction in the time individuals have to pay the capital gains tax due.

Currently individuals have until the normal self-assessment deadline to report and pay any tax due, currently 31 January after the end of the relevant tax year. However under the new proposals the individuals will have only 30 days from the actual disposal date to pay the capital gains tax due.

Not only individual landlords will have to pay CGT within 30 days they were also dropped out of the reduction in CGT which was announced by the chancellor in his 2016 budget for other capital assets.

Other capital assets will suffer a reduced rate of 10% down from 18% on the basic tax rate band and 20% down from 28% on higher rate tax band.

If you require more information as to how these changes may affect you please contact us or call us on 0203 039 3993.

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