Taxman's appetite for property landlords
Like rising damp this summer, HMRC's Property Taskforce is everywhere- undertaking intensive bursts of activity around Durham, Sunderland and Newcastle. This is conceivably an initiative to target student-let property landlords.
Tax inspectors are known to snoop and fish into the personal lifestyles and businesses of property landlords and this involves (i) risk profiling tax returns; (ii) HMRC enquiry notice; and (iii) tax investigation.
Take for example the 1970s fictitious TV character 'Mr Rigsby' who owns properties near a local university. Rigsby instructs his odd job man to collect student rents and he is paid out of those takings. Only half is deposited into Rigsby's bank account. 'Mr Odd Job' claims welfare benefits and during a timely Benefits Agency investigation his confession is passed to HMRC. Odd Job is then interrogated by the taxman who compares the schedules of rooms and rental rates to Rigsby's tax returns and discovers at least a 50% suppression of rental income going back many years. The taxman opens up a full tax investigation and Rigsby's accountant instructs yours truly to prepare a brief, and then secure immunity from prosecution by submitting a full disclosure report with a tax settlement.
Tax investigations are not random and cases are selected because of HMRC's risk scorecard. This is a salutary lesson of how things go terribly wrong, and Rigsby is left to contemplate about his tax compliance shortcomings.
Written from experience of both sides of the fence, this is one of a series of fortnightly articles based on real examples to provide landlords with an insight into tax compliance activities.
For and on behalf of Tax Networks Ltd
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