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HMRC targetting 'under declaring' limited company landlords

heather powell

A property lawyer has warned that HMRC believes buy-to-let landlords may be under-declaring taxes, and that it has them in their sights.

Landlords who transferred their rental properties to a company in 2017/18 are being targeted by HMRC, says Heather Powell, partner and head of property and construction at tax and advisory firm Blick Rothenberg.

Those who incorporated their property business but have not reported a capital gain on their 2017/18 self-assessment tax return are being sent a ‘nudge letter’, explains Powell.

Tax enquiry

These ask them to check they have correctly calculated the tax relief available and refers to specific HMRC guidance on technical areas and reliefs available. If it doesn’t receive a reply within 30 days, there may be a tax enquiry, and a discovery assessment issued.

“Any landlord who receives a nudge letter should reach out to their tax advisors immediately,” says Powell.

“I would also recommend that those who have transferred their properties since 2017/18 to a company should take steps to ensure that they have correctly reported any capital gain that was realised on the transfer, as I expect that they will be the next recipients of an ‘HMRC nudge letter’.”

Impacted

She explains that incorporating a property business is an integral element of many of the schemes marketed to landlords, significantly impacted by the restriction of interest when calculating the income tax payable on rents received from properties held personally.

She adds: “The nudge letters currently being issued are not as emphatic in stating that UK taxes are payable but give a very good indication that HMRC believe buy-to-let landlords may be under-declaring taxes due, and that they have them ‘in their sights’.”

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