Print friendly version 18 Jun 2008

Landlords warned over legacy tax bills

Her Majesty's Revenue & Customs (HMRC) is turning its attention to undeclared rental income, according to Route Group, a wealth management firm.

Landlords looking to sell their buy-to-let property at the moment, due to uncertainties in the residential property market, could be facing a significant legacy tax bill in addition to Capital Gains Tax (CGT) charges, if they haven’t declared the rental income.

Simon Pimblett, head of research and development at Route Group, explained: “HMRC has started to focus strongly on the issue of undeclared rental income and now has the technology to track down those who have ‘overlooked their obligations’. HMRC can now cross-reference information from the Land Registry, Stamp Duty records and property agents’ records with taxpayers’ self assessment to identify culprits. Should they believe a landlord has not submitted the correct returns, they have the right to request detailed income and expenses statements for the last six years.

“Earlier this year, HMRC conducted a pilot exercise whereby it sent out letters to landlords it believed were in breach, and has promised to widen the search during the latter half of 2008. Therefore, we recommend that all landlords get their records in order – prior to an unwanted letter or phone call from their local tax office, who will not only claim back what is owed but could also impose interest and penalties.”

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