Every week brings a new tax crackdown, and the latest in the firing line are
buy-to-let landlords. The issue is the mortgage interest they claim back on
rental income, and whether or not they are claiming it correctly.
Some are issuing dire warnings about the consequences that will ensue, with
fines and penalties going back six years, the usual stuff of a tax crackdown,
set to follow.
According to reports, tax advisers met with HM Revenue & Customs a
fortnight ago to discuss how to tackle what the taxman clearly feels is a lack
of compliance on the issue of mortgage interest relief.
There are suggestions landlords may not be claiming the right amount,
assuming either that the interest must be greater than the rent without
checking, or claiming the repayment part of the mortgage as well. Some might
not even realise that they can claim the interest, though that is not thought
to be the taxman’s focus. The taxman has been vociferous in denial. Its
response in an email in bold and underlined letters was: ‘We are not
planning a tax crackdown.’
But the detail has not dispelled the rumours. The next line was enough to
encourage critics: ‘We met with representatives of the accountancy profession
last week for their views on how we can 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.’
What’s going to happen…
The usual possibilities with a tax crackdown hove into view; enquiries,
penalties, tax to be reclaimed going back six years.
Whether any will materialise will depend on your point of view. Is it likely
that the 80,000 or so landlords mooted in reports really don’t know mortgage
interest from mortgage repayment? We are talking about one of the more
financially savvy tranches of the population. Is it likely that someone who can
afford not just one, but two houses, is too cheap to hire a tax adviser?
Whatever happens with taxpayers, you can expect to see the story reappear again;
when the taxman agrees on ‘advice’ for landlords, or even an ‘intervention’
letter to be sent out to the miscreants.
An untrue story can go halfway around the world before the truth gets its
trousers on, and the same goes for tax crackdowns. Every buy-to-let landlord
will be muttering at dinner parties about how others of their number are set for
tax bills; few are likely to be.
Does Darwin's theory apply to taxation? Colin ponders...
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