HMRC has apparently sent out around 500 letters to investors who may not have included income from their BTL properties on their tax returns.
It is also believed that around 1,500 more notices could be sent out in a probe to target property owners who may have failed to declare their investments over the past few years.
The letter reportedly states: ‘I have information that suggests you have received rent from property but have not included it in your tax return. I need to check with you if my information is correct and, if you have received rents, to work out any tax that may be due.’
The correspondance also asks for information about any investments in property during the past six years and if any money has been received as rent and has not been declared then the landlord may be liable to a tax charge on it.
Accountants Wilkins Kennedy has warned that it is a real change in tactics for HMRC as it has been compiling lists of landlords from lettings agencies over a number of years.
Peter Goodman, senior tax partner at Wilkins Kennedy, commented that landlords who recieved the HMRC letter should take it very seriously indeed.
He explained: “Individuals who receive these letters need to take them seriously. If they do owe tax they should consider early disclosure as part of a negotiated settlement. This may reduce the penalties they incur. People who refuse to co-operate with HMRC on this could ultimately face criminal prosecution.”
Tim Hague, managing director of BM Solutions, added that it was important that BTL landlords do their homework and utilise mortgage intermediaries as a resource.
He explained: “The vast majority of landlords treat their BTL properties as a business, and will be fully aware of the tax implications of their investments.
“It’s really important that they do thorough research on their tax liabilities and get advice on their property investments – mortgage intermediaries can be invaluable in doing this.”