HMRC’s Let Property Campaign – information for Landlords
Posted on 2014-06-01, by Montpelier
The Let Property Campaign has been launched to target those in the residential property letting markets that are not paying the correct amount of tax.
The Scheme is designed to encourage landlords to put right any errors or omissions in their tax affairs.
HMRC have provided examples of errors which have lead to landlords understating or not reporting their profits from property and these include the following:-
- A landlord believes he makes no profit from the property as his mortgage payment exceeds his rental income. The landlord has not realized that only the interest element of the mortgage payment is an allowable expense for tax purposes
- An individual inherits a property by the seaside which he uses himself but also lets out as a holiday let. All rental income should be declared to HMRC together with a claim for the offset of eligible expenses
- Overseas workers who come to live and work in the UK will be resident here for tax purposes. As such, they will be taxed on their worldwide income including any rental income that they get from their property in the country of origin
- A landlord who has had an interest only mortgage for a number of years could have originally had expenses which exceed the rental income. A drop in interest rates could change his cash flow position such that his property income now exceeds his expenditure resulting in rental profits
- An elderly landlord who moves into a care home and uses the rental income to fund the care home fees might mistakenly believe that he is not making a rental profit
- People who relocate with their job and temporarily rent out their homes whilst working away. This would include those working overseas
- People claiming ‘Rent a room’ relief when they are not entitled to. The relief is only available to those who rent out a room in their own home and where the rental income is below £4,250 per annum
Husband and wife landlords who do not apportion rental profits equally on their tax returns. These profits should be taxed equally unless a Form 17 has been previously submitted to HMRC
- Landlords who claim for excessive expenses on their holiday homes which they also let out to others. Expenses incurred whilst the landlord is in occupation are not available for offset against rental income
Voluntarily reporting an error of omission will result in a greater degree of leniency by HMRC than with those who are found out by HMRC.
As always, individuals should contact us if they believe that they could have not reported the correct rental profits to HMRC.« Back to Articles