Posts with tag: HMRC

HMRC debating new tax regime for smaller BTL investors

Published On: August 16, 2016 at 11:04 am

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HM Revenue & Customs has moved to launch a 12-week consultation on a scheme which it claims will improve the simplicity of tax demands levied on lesser-scale buy-to-let investors.

The new proposal, if agreed, will see buy-to-let landlords with an annual rental income of below £10,000 not permitted to keep their business records digitally. In addition, landlords falling into this category will not have to provide quarterly updates to HMRC.

However, they will still be obliged to utilise the so-called ‘optional cash basis.’

Alterations

If the proposal receives approval, it is likely to be introduced in the Finance Bill 2017, for full implementation in 2018 or later.

Through its wide-ranging digitisation programme Making Tax Digital, HMRC had been banking on landlords to utilise specialist software in order to keep detailed business records. These would then be submitted quarterly.

HMRC debating new tax regime for smaller BTL investors

HMRC debating new tax regime for smaller BTL investors

The cash basis option will only be made available to simple property businesses. These include individual landlords and partnerships where partners are individuals.

This said, a statement from HMRC noted, ‘the option to use the cash basis will make budgeting for tax easier for landlords allowing them to better manage cashflows.’[1]

Under the cash basis, buy-to-let landlords would only be permitted to declare their rental income for cash actually received. As part of the digital quarterly accounting scheme, they would be required to include the income that their tenants should have paid as income for the year-even if this rent had not been paid.

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/8/hmrc-mulling-easier-tax-regime-for-small-scale-buy-to-let-owners

 

 

Stamp Duty tax avoidance schemes rising

Published On: July 4, 2016 at 8:55 am

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A higher number of landlords are looking to avoid paying the additional 3% Stamp Duty surcharge by being sucked into unscrupulous tax schemes.

An investigation by the Telegraph has revealed that there has been a rise in firms selling so called ‘tax solutions’, claiming to exploit loopholes in the to legally mitigate the surcharge. These firms propose to offset the costs for buy-to-let investors in England, Wales and Northern Ireland when buying property in return for an upfront fee.

Stamp Duty cons

David Hannah, consultant at Cornerstone Tax, a conveyance firm offering legitimate tax planning services to reduce Stamp Duty, spoke exclusively to the Telegraph. Mr Hannah noted that demand from investors worried by Stamp Duty charges had turned into a, ‘tsunami’ following its inception on 1st April this year.

Hannah said, ‘my team has gone from doing one or two of these cases to doing 15 or 20 a day.’[1]

However, HMRC warned that these schemes do not generally work, classing them as tax avoidance. It notes that people taking part in them could be forced to pay 100% of the original tax plus interest, which will leave them substantially worse off.

Stamp Duty tax avoidance schemes rising

Stamp Duty tax avoidance schemes rising

Costly

A spokesperson for HMRC noted that, ‘these kinds of schemes don’t work. We have investigated thousands of cases since 2013, bringing in over £200m in Stamp Duty Land Tax. These individuals have had to pay 100% of the original tax plus interest.’[1]

‘They will be much worse off than if they had just paid the right tax at the right time, especially where they have paid fees to the promoter of the avoidance scheme which are not refundable,’ they added. [1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/7/dodgy-tax-avoidance-schemes-could-cost-landlords-thousands

Taxman recoups £301.8m in unpaid tax

Published On: December 1, 2015 at 2:45 pm

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Private client law firm Collyer Bristow has estimated that the British taxman snared £301.8m in unpaid property tax during the last year. This has been called an aggressive clampdown on those who actively avoid paying stamp duty.

HMRC’s new Counter Avoidance Directorate collected the monies during the last twelve months as part of an increased no nonsense policy on Stamp Duty and Land Tax (SDLT) avoidance.

Success

The firm said that this data was provided to them by HMRC and indicates that the scheme is proving a success. The Counter Avoidance Directorate was set up in April 2014, with the intention of bringing together HMRC’s work on tax avoidance and policy.

James Badcock, partner at Collyer Bristow, noted, ‘the Government’s aggressive clamp down on SDLT avoidance schemes over the last few years is now bearing fruit. The high returns from compliance investigations mean that this area is likely to remain under the spotlight for some time to come.’[1]

He went on to point out that property values have soared over recent years, particularly in London and the South East. As a result, many taxpayers have seen a more substantial SDLT bill.

Taxman recoups £301.8m in unpaid tax

Taxman recoups £301.8m in unpaid tax

‘Avoidance schemes were being used to reduce SDLT on what for London are relatively modest properties in the £1m region as well as very high value properties. As well as the Government closing down schemes with legislation, HMRC has tackled previous planning through the disclosure regime, better resourced investigations and litigation,’ Badcock continued.[1]

Advice

Mr Badcock also observed that in many cases, there is likely to be a legal justification for transactions that allowed an SDLT liability to be missed. ‘Individuals who decided to engage in the planning because it seemed so easy at the time may not have the stomach for the fight once faced with a HMRC challenge. This can be expensive but another critical factor is a climate in which engaging in abusive tax avoidance can cause reputational damage to those in the public eye,’ he said.[1]

[1] http://www.propertywire.com/news/europe/uk-property-tax-crackdown-2015120111265.html

 

NAEA warns agents on money laundering

Published On: June 19, 2015 at 2:47 pm

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Estate agents are being warned to make sure they are compliant with all money laundering regulations, following a warning that unscheduled checks are being carried out across the country.

The National Association of Estate Agents warn that HMRC have been making unannounced visits to agency offices to check that the organisations are adhering to anti-money laundering procedures.

Battling crime

In a statement, the association said:

‘We wholeheartedly support HMRC in conducting these checks and in the wider battle to fight the criminals. We also want to ensure that NAEA agents are the best in the business, but understand that with so many other priorities it’s easy to let your knowledge slip, and even the most diligent of agents need refreshers now and again.’[1]

While the number of visits made by HMRC is unknown, it is not thought that the agencies visited had raised suspicion of illegal activity.

NAEA warns agents on money laundering

NAEA warns agents on money laundering

Duties

In response to the activity from HMRC, the National Association of Estate Agents has issued a number of duties expected of agents to make sure they comply with money laundering rules.

With regards to suspicious activity, the NAEA say that agents should be vigilant of:

  • activity that does not make commercial sense
  • clients seeming uninterested in the transaction
  • prices that do not match up with market value
  • any purchases made where the property has not been viewed or just seen on the internet
  • weak reasons for paying cash, ie offering large cash sums for payment of property purchases, interest, rent or fees
  • cash exchanges between seller and buyer, including a cash deposit
  • unusual sourcing of funds. This could involve third parties, large payments for private funds and cash gifts
  • unsatisfactory explanations of early redemption of mortgages, notably where there has been penalties involved

Where an agent believes illegal activity has occurred, they should complete a National Crime Agency Suspicious Activity Report (SAR) to comply with the Proceed of Crime Act 2002. SAR’s should include all available Customer Due Diligence information.

Additional information on money laundering and how to properly complete a SAR can be found at www.nationalcrimeagency.gov.uk

[1] http://www.estateagenttoday.co.uk/breaking-news/2015/6/hmrc-making-anti-money-laundering-spot-checks-on-agents

 

 

HMRC Urges Landlords to Clean up Taxes

Published On: March 21, 2014 at 9:17 am

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HMRC Urges Landlords to Clean up Taxes

HMRC Urges Landlords to Clean up Taxes

Some landlords fail to pay the correct amount of tax on their rental income. HM Revenue & Customs (HMRC) has revealed that there is £550m worth of tax missing from the private sector.

The Let Property Campaign aims to get this money back, and is targeting all landlords that have not paid the right amount of Income Tax in the last few years. Offenders can take advantage of a grace period, in which they can voluntarily come forward and thus pay a 20% fine. Those caught out will be ordered to pay 100%.

It is possible that those who are found to be deliberately dodging tax payments could be prosecuted. Kevin Power, who avoided paying £84,000 in tax, was sentenced to 12 months imprisonment.

HMRC state that they are not trying to be too tough on landlords, accepting that some may have not paid the right amount by accident. Accidental landlords specifically may find it difficult to fill out their tax returns, as they may not understand what counts as deductible, such as letting agent fees and landlord insurance.

An HMRC spokesperson says, “not every landlord who owes tax is deliberately trying to cheat the system”, adding that the campaign is “not about penalising genuine mistakes.”1

HMRC have claimed that the majority of those that have not paid the correct amount in tax are usually just a couple of hundred pounds out, and most of these landlords will not be fined.

If you could be affected by the campaign, contact HMRC as soon as possible. It could also be wise to hire an accountant who will manage your finances and complete your annual tax returns.

The private rental sector is rewarding for many, and some of those will try to take advantage of the system. The Let Property Campaign should find those landlords and reclaim the money, putting more finance into the economy and private rental market.

1 http://www.justlandlords.co.uk/news/HMRC-urges-Landlords-to-come-clean-over-Taxes-1796.html

HMRC on Lookout for Undeclared Rental Income on Tax Returns

Published On: November 7, 2013 at 12:56 pm

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Lenders and HM Revenue & Customs (HMRC) are targeting accidental landlords who let their previous home after moving.

Many of these landlords may not be aware that they must have consent from their mortgage provider before they can rent out their property when they move on.

In most cases, the lender will charge the homeowner a fee to change their mortgage terms, or raise the interest on their mortgage, to mirror buy-to-let loan rates.

Mortgage lenders are apparently searching through voter lists, and online letting listing to try and find offenders who are breaching their terms.

HMRC on Lookout for Undeclared Rental Income on Tax Returns

HMRC on Lookout for Undeclared Rental Income on Tax Returns

Mortgage brokers, who have been contacted for details of their clients, have warned accidental landlords.

Accidental landlords may also discover that their rental properties are not insured sufficiently, as standard home insurance policies do not cover let homes.

HMRC is also looking for those who do not declare rental income on their tax returns.

They are using the same methods as mortgage lenders to uncover accidental landlords, and also researching local authority housing benefit records, and Land Registry figures.

HMRC is offering an amnesty period for those who come forward and declare any past rental earnings.

Ray Boulger, from mortgage broker John Charcoal, says: “We know there are many borrowers who have let their property but failed to inform their lender.

“Before the financial crisis, lenders didn’t often check whether borrowers were still living in their property, but they are increasingly doing things like checking the electoral register to see who lives at an address and looking on letting websites such as Rightmove to see if a property is listed. These borrowers now run a much greater risk of being caught.”

1 http://www.landlordzone.co.uk/news/tax-man-lenders-target-accidental-landlords