HMRC Rental Income Taskforce
Background
HM Revenue & Customs (“HMRC”) continue to target buy to let landlords and are launching regional taskforces to target under declared rental income and capital gains. It is anticipated that taskforces will bring in more than £100m in additional tax receipts during the 2014/2015 tax year.
HMRC hold a database for all property disposals attracting Stamp Duty Land Tax and will compare this data to individuals tax records to establish whether any disclosure was due which hasn’t been made. HMRC also receive information from other sources such as the Tenancy Deposit Scheme and letting agents to show which individuals are receiving rental income.
Despite this information, HMRC’s systems can be blunt instruments and there may be a variety of reasons why the information is misleading, incomplete or plainly wrong.
Disclosure opportunity
The taskforces are part of HMRC’s wider remit to tackle evasion and avoidance but targeting specific sectors is not an amnesty. Unlike some other HMRC initiatives which seek to tempt taxpayers to come forward under favourable terms, there is no formal disclosure facility on offer when a taxpayer is targeted by a taskforce. HMRC inspectors will therefore have the full range of civil and criminal sanctions at their disposal.
However, taxpayers with under declared rental income or gains should make a full unprompted disclosure to HMRC first. Disclosing this before HMRC contact the taxpayer will lead to reduced penalties on any outstanding tax liability.
Calculating capital gains or profit on rental income is often not straightforward, particularly where the property has had a mixed use during its ownership. If you require more information about either the taskforce or tax on property gains in general please contact our Tax Director, Jenny Marks.