Claims that ‘HM Revenue & Customs has identified 80,000 landlords who may have claimed too much tax relief or have failed to declare the amount of rent they receive from the property, or a capital gain made on the sale of the property’ – appear wide of the mark, as HM Revenue & Customs dismissed in the strongest terms that they are taking action against landlords, explaining that this is an exercise to improve communication with landlords.
Patrick O’Brien of HM Revenue & Customs Press Office said: "We are not planning a tax crackdown or to otherwise target landlords. We met with representatives of the accountancy profession last week for their views on how we can best inform landlords of their existing obligation to report their property income to us and how we can help landlords to make accurate returns that don't require further work. This will benefit taxpayers and HMRC."
John Heron, managing director of Paragon Mortgages, said: “Our experience is that landlords in general are both astute and financially sophisticated, as befits a group that owns 2.8 million properties, more than one in ten of the nation’s housing stock. We find it hard to believe that there are significant numbers of landlords who have not made a proper declaration to the Inland Revenue – certainly there is no evidence to support such a claim. As the leading buy-to-let specialist lender Paragon Mortgages has always provided information and support to its landlord customers and to the intermediaries who advise them. A free tax guide is available for download from our website and HM Revenue & Customs provides extensive information."
In broad terms, tax matters for landlords are straight forward: tax is payable on rental income after the cost of running the property and financing the purchase and development of the property. However, interest paid on any proportion of a loan not taken out for purchase or development is not a business expense.
Heron said: “Nevertheless, it is wise for landlords to make sure that they are on top of their tax affairs. There are plenty of sources of information which set out in clear terms the obligations on individuals in terms of declaring income on rented property - if there is any doubt landlords should consult their financial adviser or accountant.”
