Hmrc Tax Advisors for Investigations
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No one wants to hear that the tax man is snooping around. HMRC tax investigation can be a real challenge. This is what is happening with the ongoing “Let Property Campaign” that is being undertaken by HMRC currently. Many landlords across the UK are receiving notices from the government encouraging them to participate in this campaign. What is the campaign? Why is it being done? How does it affect you? What will it mean for the future?
What is the campaign?
HMRC tax investigation can be daunting, HMRC has been going through a significant effort of late to crack down on people who are not reporting their income. The eyes have now become fixed on landlords.
The campaign essentially gives landlords a period whereby they can come forward about undeclared income from rented properties and not incur such a serious penalty. If the landlord decides to not come forward, a further investigation can be launched, and if irregularities are found a much more severe set of penalties will be charged.
Making a Voluntary Disclosure
This is essentially a way of encouraging people to pay the right amount of tax and offering an incentive to do so. Since many landlords have incorrectly reported their earnings for many years, the penalties would be huge. This incentive means that the penalties will be slashed if the tax is paid. Thus, HMRC are creating an environment that encourages voluntary disclosure before things get too complicated.
This campaign only applies to people who rent out residential properties, it does not apply to commercial properties of any sort.
Why is this being done?
Tax evasion is something that HMRC are cracking down on in many areas. There is an estimated £500 million of unpaid landlord tax, and this number keeps growing. HMRC also estimate that 1/3 of landlords are not accurately reporting their income, and they are aiming to bring this number very low.
With technology evolving, the future will create a much more difficult place for tax evasion, so this is a good will gesture by HMRC to reclaim what they are rightfully owed. In the future, information from the land registry, and every other public institution will be very easily accessed by HMRC, thus making their job much easier.
Who should take advantage of this?
It may be the case that you have not willfully under reported your rental income, but it might be the case that you have made a mistake, or perhaps been a little negligent in getting all the right information. These, although treated as less severe by HMRC are still subject to penalties if you do not take advantage of this opportunity.
Many people make simple mistakes, for instance, capital repayments on your mortgage are not tax deductible, only the interest is. Many people make this mistake and can thus be stung with a heavy penalty if the situation is not sorted. This is just one example of how a simple error could result in a large tax bill and a fine to boot. Avoid this stress by getting in touch with a local accountant. An accountant can comb through your rental income history, point out any irregularities, and even handle the liaising with HMRC. It could save you a huge headache, and a hefty fine.
What does this mean for the future?
As mentioned, tax evasion is the new pet project for HMRC. This makes sense in this era of global financial stagnation, and the extra money from under reported income is a non-trivial amount for the UK government moving forward.
The loopholes and sloppy HMRC tax investigation are coming to an end. It is good advice to get on board with the new way of doing things, because as the country begins to handle things like Brexit and market uncertainty, they will be looking to recoup every single pound they are owed.
For your income, it means that taking extra care is in order. Get a reputable accountant to take care of the details of your rental income. This will help you to avoid any complications as HMRC begins to grow teeth.
Summary. The Let Property campaign is targeting landlords who have neglected to pay all their taxes. The campaign will not last forever so get on board in good time. Minimise the damage that can be caused by getting good counsel with an accountant. Make sure that moving forward all your rental income affairs are in order so as to avoid any problems in the future.
GM Professional accountants have offices located in London, Manchester and Essex.