HMRC is targeting residential landlords in its latest nudge campaign that it suspects are not declaring their full rental income, warns accountants business and tax advisers Kreston Reeves.
The campaign comes in advance of Jeremy Huntโs first Autumn Statement and rumours of a further attack on residential landlords with higher rates of Capital Gains Tax on property disposals and higher rates of National Insurance.
George Guilherme-Fryer, a Director in Tax Disputes team at Kreston Reeves said, โThese nudge letters are widely targeted at individuals or businesses based on information received, primarily from other governmental departments, banks or, in this case, the tenancy deposit scheme.
โLandlords in England are limited to taking a five weeksโ deposit for new and renewed tenancies with rent under ยฃ50,000 a year or up to six weeks if the annual rent is ยฃ50,000 or more. As most landlords take the maximum deposit, it is not difficult calculation for HMRC to calculate the expected rental income which should be included in a tax return.
โFor example, if the deposit held with the tenancy deposit scheme is ยฃ1,000, five weeks of ยฃ200, then HMRC will assume an approximate rental income of ยฃ10,400 annually, or ยฃ200 per week.
โThese latest nudge letters tend to include a statement saying that HMRC has received relevant information, suggesting the landlord review their tax position, and including a suspiciously simple certificate of tax position to be completed and returned.
โThese letters will not take into account vacant periods or reductions in rent and will often mean that no action is required and there is no obligation to respond or to sign the certificate of tax position.
โBut landlords are advised to review their tax position if such a letter is received to identify if any disclosures are needed. If they are ignored and it is later found that tax is due, it may lead to an investigation and potentially a criminal prosecution.โ
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