Hefty fines could be in store for owners of second properties who believe they do not owe income tax because rent revenue is swallowed up by mortgage payments.
They are being targeted by a fresh HM Revenue & Customs (HMRC) campaign against landlords who have not declared rent on their tax returns.
“HMRC believes this campaign will generate significant arrears from unsuspecting taxpayers,” said Alan McCann, a director of tax at business advisers DTE.
“HMRC is confident of success because information from stamp duty land tax returns means it can match properties to individuals’ declared principal private residences and take matters from there.”
The campaign is initially a pilot exercise with an option to launch a major campaign depending on results.
HMRC sent a first batch of letters in February to people who complete Self Assessment Tax Returns but have not declared rental income on previous returns.
“The letters are not formal enquiries and there is no legal obligation to respond,” explained Alan McCann. “However, if no reply is received in the usual 30-day period, a reminder will be issued and if there is no response to this, HMRC will consider a formal inquiry.
“I would advise property owners to urgently review their tax position in relation to second properties generating rental income. If there is a tax arrears issue, coming forward with a voluntary disclosure could reduce any penalties.”
Alan McCann added: “If a property was bought entirely or partly by funds from other asset sales you should consider whether there may be any additional capital gains tax issues.”
Further information: David Chadwick (Public Relations) on 01204 497085, mobile 07905 859686
Notes to editors:
DTE is a professional services group, ranking in the UK top 30 accountancy practices, with a turnover of £18m. The firm employs over 200 staff and delivers a full service offer from offices in Manchester, Birmingham, London, Wolverhampton, Bury and Blackburn.
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