Property landlords across the UK have been warned about new rules to tackle tax avoidance.
The warning comes from property management specialist Julia Williams who is concerned that not all the region’s landlords are taking the necessary steps to protect themselves from scrutiny.
Ms Williams’ alert follows new HMRC measures, introduced in January, which require letting agents to provide paperwork on every property they rent out on behalf of landlords.
For many agents this is the first time that HMRC has asked for the information and the new crackdown is in stark contrast to the previous practices where inspectors would carry out spot checks at letting agencies.
Following the sweeping changes, Mrs Williams, director at Midland letting agency Premier Places, is urging landlords to avoid financial penalties and make sure all income from rental and investment properties is declared.
She said: “These recent HMRC changes have altered the financial landscape for all landlords, as even if they are not making a profit, they must declare all income from their property portfolios.
“If they fail to do so HMRC has made it clear they will back-date any tax owed and landlords may face penalties.
“HMRC used to visit lettings agents and focus on specific properties at random. This was a very ad-hoc approach and not universally popular.
“But the landscape isn’t just changing for landlords as now agents, such as ourselves, have to supply lists of all the properties on their books, the rent they collect from tenants as well as confirming how long the properties have been let for.
“In many ways it’s an administrative headache for the industry but HMRC is stringently double-checking that all financial data stacks up and that landlords are declaring their finances fairly.”
Mrs Williams said that people who have recently become landlords have until 5 October to inform HMRC that they are now receiving a rental income.
Mrs Williams added: “As an agency we are well-versed in the new rules and can give expert advice. But the most basic thing for any landlord to consider is that if you have started renting out a property then you must inform HMRC.
“If your profit is £2,500 or more or you’re not on PAYE you will need to fill out a self-assessment form. It’s far better to get this in order straight away than face the risk of
back-dated tax or even a penalty. If profit is less than £2,500 a year, landlords still have to inform HMRC.
“We’re very much in a cycle at present where HMRC is looking to do things differently – it’s causing some angst but landlords must untangle their paperwork or face a far worse nightmare.”
Premier Places has its own specialist tax division which can advise landlords – guiding them through their options including what to declare and the different allowable expenses that can reduce tax bills.