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Tax man gets tough with property investors

24 April 2015

Tax man gets tough with property investors
Landlords who fail to take a chance to disclose rental profits or capital gains may face a tough penalty scheme, HM Revenue & Customs (HMRC) has warned.

HMRC has relaxed penalties on landlords who catch up with undeclared income from buy to let under the Let Property Campaign, but is running out of patience with investors known to have failed to put their finances in order.

The tax authority has a list of buy to let and house in multiple occupation (HMO) landlords garnered from letting agents, mortgage lenders, councils paying housing allowance, utility companies and the Land Registry.

The tax authority wants landlords to come forward and settle unpaid taxes with the lure of lower penalties.

However, HMRC has also published a statement warning landlords who fail to taken advantage of the campaign that they will face higher penalties.

“We are increasing our compliance activity and will be contacting landlords who we have identified as failing to pay tax on undeclared income,” said an HMRC spokesman.

“Anyone we contact will automatically be excluded from the Let Property Campaign, so will not have the benefit of lower penalties.”

HMRC says landlords who have not declared capital gains or rental profits by making a careless mistake will only face inquiries going back six years, but anyone deliberately avoiding declaring their tax will face an investigation that could go back 20 years.

Penalties for these cases will be 100% of any tax owed in the UK and 200% for any money hidden offshore.

Under the Let Property Campaign, penalties are between 0% and 20% of the tax owed.
“If we write to a property owner, any disclosure will be treated as prompted and will not qualify for the lower penalty regime,” said the spokesman.

The Let Property Campaign is open to individual property investors with buy to lets, HMOs or holiday lets - companies and trusts are excluded.

Find out more information about making a Let Property Campaign disclosure here