Buy-to-let couples face new tax bill

Fears that legislation intriduced to deal with the problems raised by the Arctic Systems case could hit couples who own buy-to-lets

Written by Alex Hawkes

Accountancy Age, 13 Dec 2007

Couples who let property could be hammered with tax bills as a result of the government's moves on family-owned businesses.

The taxman wants to stop husbands and wives managing salaries and dividends within their businesses such that they maximize their tax allowances and minimize tax.

But PKF thinks the new rules could apply to couples who transfer property to a spouse, and may mean the rental income is taxed as the income the spouse gifting the property, not the new 'owner.'

Peter Penneycard, tax partner at PKF, said: 'Neither the draft legislation nor the draft guidance from HMRC state that buy-to-let partnerships are excluded from the new rules.

'Of course, this could simply be a drafting mistake and, if it is, HMRC owe it to the taxpayer to make the point clear. However, I'm not so sure. The trend in recent anti-avoidance legislation has been to catch as much as possible and then for HMRC to issue guidelines, which have no weight in law, on what the rules are targeting.

'If the Government intends to catch what is a fairly common practice among couples letting properties, it will justifiably be accused of introducing another stealth tax.'