Landlords warned to get tax affairs sorted

Published on

Private landlords are being warned to get their tax affairs in order to avoid being caught in a crackdown by tax inspectors.

Phil Bates, Principal at Cheshire accountant Phillip Bates & Co, says the potential penalties are severe unless landlords ensure they have registered with HM Revenue & Customs (HMRC).

Bates, who has over 100 landlords as clients, says HMRC has stepped up its campaign to bring to book any landlords who they believe are avoiding paying tax due on rental properties.

Figures for 2013-14 showed that tax inspectors obtained more than £130 million as a result of enquiries into underpayments of capital gains tax.

Fewer than 500,000 taxpayers are registered with HMRC as owning second properties. HMRC estimates that the true number of landlords is much higher, at around 1.5 million.

Since January, a number of landlords have contacted Phillip Bates & Co having received letters from the Revenue over unpaid tax.

Bates said: “A number of new clients are private landlords who have fallen foul of HMRC. A landlord must pay tax on profit just like any other business but only after costs – known as allowable expenses – have been deducted.

“This is where there is sometimes uncertainty. For example, allowable expenses do include reasonable repairs and maintenance to keep a property in good order, but they do not cover renovation costs incurred prior to letting or extensions, although these can usually be claimed for capital gains tax purposes when the property is sold.

“The potential penalties for landlords failing to pay their tax are severe – as much as 35% of the potential lost revenue is standard, where HMRC makes initial contact with landlords.

“The Revenue is able to gather information on private landlords from various sources. The way to avoid a nasty investigation is to register as soon as possible and ensure your tax affairs are in order.

“The penalties are likely to be reduced or avoided entirely if a landlord advises HMRC first rather than waiting for the Revenue to catch up with them.”

COMMENT ON MORTGAGE SOUP

We want to hear from you!
Leave a comment and get the conversation started.
You need to register to post, so please login or sign up below.

Latest articles

Just Wealth posts 63% rise in assets under management as referrals grow

Just Wealth, the financial advice arm of Just Mortgages, said assets under management rose...

Growing demand for faster, more supportive broker service among first-time buyers

First-time buyers are leaning heavily on brokers for speed, reassurance and help navigating affordability...

Middle East conflict clouds mortgage rate outlook and Autumn Budget decisions

Energy market volatility has driven borrowing costs higher in recent weeks, forcing mortgage lenders...

Clydesdale Bank to raise selected residential and buy-to-let rates

Clydesdale Bank will increase a range of residential and buy-to-let fixed rates from Friday...

Virgin Money to raise selected mortgage and buy-to-let rates

Virgin Money is increasing a range of residential, remortgage, buy-to-let and product transfer rates...

Latest publication

Other news

Q&A: Anne-Marie Lister, Rebecca Hurdiss, Michelle Boylan & Manasi Nayyar, GB Bank

Mortgage Soup fires the questions at Anne-Marie Lister - chief operations & people officer...

Just Wealth posts 63% rise in assets under management as referrals grow

Just Wealth, the financial advice arm of Just Mortgages, said assets under management rose...

Growing demand for faster, more supportive broker service among first-time buyers

First-time buyers are leaning heavily on brokers for speed, reassurance and help navigating affordability...