The taxman will be launching HMRC tax enquiries and tax investigations into the tax affairs of buy-to-let landlords who do not pay the right amount of tax; HMRC’s new tax evasion taskforce will focus on property rentals in London, Yorkshire, East Anglia and the North East of England.
In their war on tax evasion HM Revenue and Customs have identified UK property rental ‘hotspots’ that will be targeted in their bid raisean additional £7bn per year by 2014/2015 from tax evasion, tax avoidance and tax fraud. In 2012 HMRC have recovered £50m from similar HMRC Tax Amnesty for Buy-to-let Landlordstask forces so far; the most recent HMRC tax amnesty opportunity being available to online traders.
“We have made it clear that we will not tolerate tax evasion – everyone needs to pay the taxes they owe in full. We are determined to crack down on the minority who choose to break the rules. It is not fair, that at a time when most hard-working people are paying the right tax, others are trying to get out of paying what they should. This is not an empty threat – HMRC can and will track you down if you choose to break the rules,” announced David Guake, the Exchequer to the Secretary, in HM Revenue and Custom’s press release on 31 May 2012.
Buy-to-let tax evasion ‘hotspots’ identified by HMRC include London, Leeds, York, Nottingham, Leicester, Lincoln, Sunderland, Durham and East Anglia. HMRC have projected that targeting tax evasion on property rentals in the UK will recover £17m and it can be expected that HMRC investigations into property rentals will follow in other parts of the country.
So what does this mean if you are a buy-to-let landlord located in the areas that HMRC will be inspecting for tax evasion?
HMRC’s taskforces target specific sectors and areas where they believe there is a high risk of tax evasion. If you are a buy-to-let landlord in one of the property rental ‘hotspots’ identified by HM Revenue and Customs, then you can expect a possible visit from the taxman.
HMRC inspectors will be looking to examine property rental traders’ records and paperwork to ensure that the right amount of tax has been paid and that there is no evidence of tax evasion. If tax evasion is suspected then an HMRC tax investigation could be launched intoBuy-to-let landlords can anticipate a visit from the taxman your personal tax affairs.
If you have been evading tax – this could be either PAYE, income tax, or other taxes – first and foremost you should contact a tax investigations professional for advice.
Instead of waiting for HMRC to uncover any tax evasion, buy-to-let landlords should consider coming forward by making a voluntary disclosure. A tax investigations expert should handle this for you to make sure that you receive the lowest possible tax penalties, aren’t faced with a tax prosecution and to save public embarrassment of being ‘named and shamed’ under the deliberate defaulters scheme, which could see your name printed on all the major newspapers in the UK if found guilty of tax evasion.
HMRC’s taskforce to target tax evasion in the property rental market falls under HM Revenue and Custom’s larger plan to uncover hidden offshore assets. Therefore, if you are a buy-to-let landlord that is targeted by HMRC’s new campaign against tax evasion in the property rental sector, if you hold offshore accounts then these too could be uncovered by the taxman and subject to offshore tax penalties.
Offshore companies and tax avoidance
One week after the announcement that HMRC will be visiting buy-to-let landlords to uncover tax evasion, The Telegraph reported that high-net-worth taxpayers in the UK have allegedly used a tax avoidance loophole to avoid millions of pounds in tax by purchasing properties through offshore companies.
The government has estimated that 5000 multi-million homes have been bought through offshore companies, allowing buyers to avoid large payments of stamp duty and inheritance tax on properties. The majority of homes are located in London and it is believed that 10% Tax Avoidance | Have 5000 multi-million pound UK homes avoided taxwere bought in the last year, with the 500 properties said to be worth a total of £1.6bn. It has also been claimed that the taxman lost out on £10m tax from the sale of one block of eight town houses in London to offshore companies.
One tax avoidance loophole tax experts’ project as a challenge for HMRC allows foreign companies to avoid 40% inheritance tax that is payable when the owner of a property dies; which could save a considerable sum for those inheriting multi-million pound properties.
“The Treasury must investigate just how much the British taxpayer is losing from these arrangements. We have called on the government to clamp down on this type of tax avoidance. With George Osborne’s claim that ‘we are all in this together’ already in tatters thanks to his tax cuts for millionaires, it’s time he got a move on and acted to this issue,” said Cathy Jamieson, shadow Treasury minister.
Help! What should I do if I have been paying the wrong amount of tax?
It seems that HMRC are coming down hard on the property sector with their launch of a new taskforce to uncover tax evasion, offshore bank accounts and tax avoidance loopholes. If you are a buy-to-let landlord or property investor with worries about possible tax evasion or offshore assets and income, you should call 0800 471 4546 to discuss your tax enquiry in confidence with an HMRC tax investigation expert.
In their larger crackdown on tax evasion, tax avoidance and tax fraud by UK trades HMRC are to release 30 new taskforces in 2012/2013. On the way to fill their quota HM Revenue and customs announced on the 31 May 2012 that 6 new taskforces had been created to target London’s indoor and outdoor markets, Yorkshire and East Midlands taxi-firms, and restaurants in the Midlands as well as property rentals in London, Yorkshire, East Anglia and the North East of England.