Times; Thousands of buy-to-let families face tax shock


K

kuacou241

The Times (UK)
May 29, 2007

Thousands of buy-to-let families face tax shock
Elizabeth Colman

Photo: http://tinyurl.com/2n9cjy

The taxman is preparing to clamp down on tens of thousands of buy-to-
let property owners who may not have paid enough tax, The Times has
learnt.

HM Revenue & Customs has identified 80,000 landlords who may have
claimed too much tax relief or have failed to declare the amount of
rent they receive from the property, or a capital gain made on the
sale of the property.

The Revenue can claw back unpaid tax from as far back as six years,
which means that some of those who have bought properties to rent or
are letting their own home could face tax bills so large that they may
have to sell their property.

It also has the power to impose penalties, which can reach the same
value as the unpaid tax bill, and charge interest on the sum.

The campaign represents the latest attempt to extract as much tax as
possible to boost revenue for the Exchequer. Britain will have the
biggest budget deficit in Western Europe next year.

As part of a campaign to tighten up the buy-to-let market, a group of
"ghost" landlords who have failed to declare themselves as property
owners will also be targeted.

The campaign will also draw on information from banks and tenants and
from letting adverts.

It is understood that many of the 80,000 taxpayers who have
underdeclared have incorrectly claimed deductions for mortgage
repayments. Landlords have to pay income tax on the rents they receive
from tenants. But under the law, landlords can offset some of the tax
they pay if they have an interest-only mortgage.

For example, a landlord who pays 40 per cent tax on a rental income,
can offset the total £625 monthly cost of a £150,000 interest-only
loan against the tax bill.

However, the repayments must relate to the interest part of the
mortgage alone. Landlords cannot claim deductions for mortgage
repayments that pay off some of the capital borrowed. A number of
mortgages have an element of capital repayment, of which the borrower
may be unaware.

The ease of obtaining buy-to-let mortgages, coupled with buoyant house
prices, has led to a boom in the investment property market over the
past decade. There are more than 400,000 buy-to-let landlords in
Britain. They borrowed more than £94 billion in 2006.

Chas Roy-Chowdhury, head of taxation at the Association of Chartered
Certified Accountants, has urged the Revenue to use a "light touch" in
its campaign.

"Buy-to-let investors are generally not tax evaders. Many think the
mortgage interest is at such a level that it covers the rental income
and that they don't have any additional tax to pay. But the tax
situation is so complex they may well have tax to pay," Mr Roy-
Chowdhury said.

The taxman will alert landlords to potential discrepancies in their
records initially by sending them a leaflet on rental income and
capital gains tax.

Recent figures from the Council of Mortgage Lenders state that
outstanding buy-to-let mortgages alone now total £9.5 billion.

Mike Warburton, senior tax partner at Grant Thornton, the accountant,
said that landlords could take advantage of the Revenue's reduced-
penalties scheme currently on offer for those who have failed to
declare their offshore income.

The Revenue is offering a 90 per cent discount on the usual penalties
that apply if individuals confess to unpaid tax on offshore income
before June 22.

"This is your chance to come clean," Mr Warburton said.

Landlords in Britain face a capital gains tax bill of more than £4.1
billion, with landlords facing an average bill of £48,600 based on
2006 housing prices, according to figures from Landlord Mortgages, a
specialist buy-to-let mortgage broker.

The average house price in 2006 according to Halifax, Britain's
largest mortgage lender, was £179,601.

A spokeswoman for the Revenue said: "We met representatives of the
accountancy profession this week for their views on how we can best
inform landlords of the obligation to report their property income to
us."

The Revenue has become much more aggressive about collecting the tax
in the past few years.

Measures introduced include a daily penalty of £60 a day for those who
persistently fail to file their self-assessment returns on time, the
removal of the cap on penalties it could charge to the value of the
unpaid bill and bonuses for inspectors who chase debts.


http://property.timesonline.co.uk/tol/life_and_style/property/buying_and_selling/article1851885.ece
 
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A

Alan Ferris

The Times (UK)
May 29, 2007

Thousands of buy-to-let families face tax shock
Elizabeth Colman

Photo: http://tinyurl.com/2n9cjy

The taxman is preparing to clamp down on tens of thousands of buy-to-
let property owners who may not have paid enough tax, The Times has
learnt.

HM Revenue & Customs has identified 80,000 landlords who may have
claimed too much tax relief or have failed to declare the amount of
rent they receive from the property, or a capital gain made on the
sale of the property.

The Revenue can claw back unpaid tax from as far back as six years,
which means that some of those who have bought properties to rent or
are letting their own home could face tax bills so large that they may
have to sell their property.
Actually the law allows for 20 years for neglect.

--
Alan "Ferrit" Ferris

()'.'.'()
( (T) )
( ) . ( )
(")_(")
 
D

davidof

But under the law, landlords can offset some of the tax
they pay if they have an interest-only mortgage.
What the journalist means is that they can offset the interest part of
their mortage, whatever type it might be.
The Revenue is offering a 90 per cent discount on the usual penalties
that apply if individuals confess to unpaid tax on offshore income
before June 22.

"This is your chance to come clean," Mr Warburton said.
Isn't it the case that after seizing bank records of offshore accounts
the revenue found that data mining this information proved "problematic"
so introduced this shake-down as an alternative. I dare say tracking
donw BTL landlords through bank information will give them equal headaches.
 
T

Tim

The Times (UK)
May 29, 2007

Thousands of buy-to-let families face tax shock
Elizabeth Colman

... buy-to-let landlords in Britain ... borrowed more than £94 billion in
2006.
...
Recent figures from the Council of Mortgage Lenders state that
outstanding buy-to-let mortgages alone now total £9.5 billion.
Is that right? £94B was borrowed just in 2006
(presumably plus more borrowed previously)
- and now less than £10B is outstanding?

Or do most BTL landlords *not* use BTL mortgages?
 
J

Jonathan Bryce

Tim said:
Is that right? £94B was borrowed just in 2006
(presumably plus more borrowed previously)
- and now less than £10B is outstanding?

Or do most BTL landlords *not* use BTL mortgages?
A lot of that borrowing will be remortgaging existing loans.
 
T

Tim

Tim said:
A lot of that borrowing will be remortgaging existing loans.
Ah, so it's not new borrowing at all?
Then the £94B figure is simply spin!
 
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J

John Boyle

[QUOTE="Tim said:
A lot of that borrowing will be remortgaging existing loans.
Ah, so it's not new borrowing at all?[/QUOTE]

No. By remortgage, the other JB means that the mortgagor uses a
remortgage to borrow more money on their domestic house.
Then the £94B figure is simply spin!
I have to admit it looks like the journalists may have misplaced a
decimal point or got confused as to the definition of Billion.
 
K

kuacou241

Isn't it the case that after seizing bank records of offshore accounts
the revenue found that data mining this information proved "problematic"
so introduced this shake-down as an alternative. I dare say tracking
donw BTL landlords through bank information will give them equal headaches.
It apparently developed that many "hits" of untaxed foreign assets
belong to non-domiciled persons -- no surprise there.

Even among those who do declare, for example, Swiss income and
dividends on their UK taxes, there are non-domiciled persons who would
rather pay (say) 10% in Britain than 35% to Switzerland, so they seek
Treaty rebates.
 
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D

dtren

The Times (UK)
May 29, 2007

Thousands of buy-to-let families face tax shock
Elizabeth Colman
rest snipped

Why the use of the emotive word 'families' in the headline? More
worthy of the Express or Wail than the Times
 

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