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Landlords Beware

The past twelve months have seen a concerted effort by HMRC to tackle non disclosure or under disclosure of letting income as this is seen as a significant area of non compliance.

HMRC have previously used letting agents as a common source for obtaining Landlord’s details. At present they only have the power to obtain details from letting agents where rent is collected by them. HMRC are now seeking to extend these powers to letting agents who have taken a fee for introducing tenants to a Landlord.

Making a voluntary disclosure of any undisclosed property income will significantly reduce the penalties charged by HMRC, which can be levied at a rate of up to 100% of the tax due on the undisclosed income.

Another area being attacked by HMRC is the incorrect treatment of mortgage payments on Landlord’s Tax Returns. Many people are unaware that only the interest element of mortgage payments are allowable as a tax deductible expense and in some cases even this may be restricted if, for example, a property has been remortgaged in certain circumstances.

Other expense claims which are often over or understated  are those that relate to improvements to a property and expenditure on Fixtures & Fittings as well as furnishings.

If you would like further information on this or would like to discuss any other tax issues regarding property investment, including Inheritance Tax and Capital Gains Tax, then please contact Stuart Shaw on 01622 758257 or via email stuart@loucas.org.uk