The HMRC is casting a watchful eye on landlords who have incorporated their property businesses, issuing a warning about potential lapses in tax compliance. This latest nudge campaign, launched specifically for the tax year 2017/18, focuses on landlords who may have omitted capital gains tax (CGT) liabilities in their self-assessment tax returns. Here's what landlords need to know to stay on the right side of tax regulations.
HMRC's campaign singles out landlords who incorporated their property businesses in the tax year 2017/18 without reporting any CGT liability. Letters sent to these landlords prompt them to review their incorporation relief calculations and address specific technical areas mentioned in HMRC guidance.
Recipients of the letter have a 30-day window to respond to HMRC. Failure to respond promptly may lead to HMRC initiating an investigation and potentially issuing a discovery assessment.
Landlords should ensure that the capital gain from incorporation does not exceed the value of the transferred property business. When calculating incorporation relief, it's crucial to match the gain held over with the value of received shares. Additionally, incorporation relief calculations should exclude sums credited to director’s loans.
If an error is identified, landlords must submit a disclosure to HMRC using the dedicated email address provided in the letter. Those confident in the accuracy of their tax return information can communicate this to HMRC via another dedicated email address.
Interest accrues on late payments once corrections are made. If HMRC doesn't receive a response within 30 days, they may proceed with a discovery assessment under section 29 of the TaxesManagement Act (TMA) 1970. HMRC also has the authority to amend claims under s9ZB TMA 1970, adhering to legislative criteria and time limits.
Landlords are urged to approach the review process meticulously, ensuring factual accuracy and adherence to assessment time limits to avoid potential penalties.
In the intricate landscape of property taxation, landlords must proactively engage with HMRC's inquiries. Timely responses and accurate disclosures are the keys to navigating potential investigations and assessments successfully. Stay informed, review your records, and take proactive steps to secure your tax compliance.
For personalized guidance on tax concerns related to property businesses, schedule a consultation with Elena Meskhi and her team. Protect your interests and ensure compliance with expert advice.
