By Mike White, of Norwich-based letting agents Martin & Co.
Under the proposals understood to have been suggested by HM Revenue & Customs, lettings agents could be forced to hand over the names and addresses of all landlords on their books, past and present. The move would make it easier to identify buy-to-let investors who are avoiding paying tax on their rental income or capital gains when they sell a property. The taxman can currently only compel agents to disclose the details of landlords who use an agent to receive rent.
The changes could see all landlords who have paid a fee to a letting agent for finding a tenant being disclosed, even if they are no longer on the agent’s books. This proposal should come as no great surprise, the Taxman’s revenues over the past 12 months have fallen drastically and he needs to replace the money from somewhere. So not only will he be looking to catch the out and out tax dodgers but will most likely be very carefully scutinising the expenses which a landlord can offset against gross rent receipts. Expect to see therefore more landlords having their tax returns audited.
Currently, if you’re lucky enough to be earning £15,000 pa (gross) from letting your property, you need to provide a breakdown of the expenses claimed. Under that only the total need be shown but I wouldn’t mind betting that £15k figure will be reduced before too long.
The biggest allowable expense landlords offset is the cost of the mortgage but be careful here too. It’s only the interest element that’s allowable, if you’ve got your investment property on a repayment mortgage, you can’t offset the bit of your payment that goes towards reducing the capital amount. A few years ago, HMRC had a big clampdown on people you were simply claiming the full amount of their mortgage payment – probably won’t be long before they have another look at this.
For further information take a look at the Government’s website: www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome
Mike White at Martin & Co. is on 01603 766860, at 13 St Giles Street Norwich.