A caution note for landlords regarding tax liabilities

Posted under Advice by Jermaine

It is important that buy-to-let landlords know about their tax liabilities and keep their accounts in order before impending crackdown by HM Revenue & Customs.

According to the Target Chartered Accountants, tax officers have been empowered to visit landlords’ homes and verify their documents. It cautioned that HMRC had gathered details of the landlords through the UK and overseas letting agents and was planning a crackdown on tax evaders.

According to Mark Tuckwell at Target, a misconception has been prevailing amongst the landlords that loss making owners were not supposed to declare their income. HMRC however does not hold the same view. Those having a source of income are supposed to declare income and will be liable for any inquiry on this issue by the tax officers. Even if there was no tax liability, the enquiry could cause lots of hassles and incur significant cost.

Mark also mentioned that many landlords mistakenly believed that they would never be detected by the taxman. HMRC has an easy access to the information on relevant properties to track those not disclosing their incomes. He advises that landlords should avoid knock on their doors and spare themselves of heavy penalties by voluntarily disclosing their income. Voluntary disclosures are being rewarded with generous concessions by the authorities.

Mark also points out that many landlords who did not take advice from tax consultants were unnecessarily paying more tax due to ignorance about allowable expenses on property. He suggested landlords to avail of experts’ advice on tax matters.