by Mark Johnston
Taxation is a complex issue and each person’s circumstances are different. Rental income arising in the UK is assessed under what is known as schedule A. the rental income from buy to let landlord’s portfolios is aggregated and then taxed.
The buy to let market has expanded massively over the past few years and many landlords have attempted to sort out their tax position themselves and the amount of tax they need to pay can be a very cloudy issue, which can lead to misunderstandings and errors in such a complex area.
Many experts believe that HM revenue and customs has increased its vigilance due to falling interest rates which have left many landlords with huge profits gained from rent.
Desperate for tax revenues the government is now to introduced a new 200 strong team of specialist tax inspectors to target amateur landlord’s its aim is to raise an additional £7 billion a year through tackling tax evasion, avoidance and fraud. As far as HM revenue and customs (HMRC) is concerned buy to let landlords is a ‘higher risk compliance target’.
The taskforce will specifically target tax evasion among buy to let landlords who own or rent out more than three properties, especially in the North West of England and North Wales. Taskforces are specialist teams that undertake intensive bursts of compliance activity in specific high risk trade sectors and locations across the UK.
The taskforce will draw on information gained from banks, tenants, letting agency’s, council tax records, land registry information and mortgage applications to name but a few.
It is thought that HMRC has already identified approximately 80,000 landlords who may have claimed too much tax relief or who have failed to declare the amount of rent they receive from all their properties.
Mike Wells, director of risk and intelligence at HM revenue and customs (HMRC) stated “these taskforces will come down hard and fast on those who have chosen to break the rules and deliberately evade the taxes they should be paying. Honest businesses, however, have nothing to worry about”.
Many buy to let landlords therefore can ‘breath a sigh of relief’ as they already utilise accountancy firms to make sure their businesses stay on the right side of the law and this is clearly a good strategy in an industry where monetary dealings can be complicated.
HM revenue and customs (HMRC) hopes however that those with tax issues will come forward voluntarily and have said they will be more lenient on those who own up. However those caught out by the new teams can expect to suffer the full force of their new powers and penalties regime.
Another taskforce has also been set up to target self employed builders who suppress sales or over claim expenses.
Mike Down, tax investigations partner at Barker Tilly said “this teamwork approach is becoming increasingly widespread and the HMRC now seems to be in full flow in coming yup with new team based initiatives”.
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