HM Revenue & Customs have announced the targets of their latest Task Force.
The group to come under the microscope next will be property owners who are either letting or selling property and not declaring the income tax or capital gains tax due.
Initially the taskforces will be primarily focused on the South West of England and South Wales.
It is assumed that HMRC feel that a lot of people have second homes, holiday cottages or rented properties in ths area. Also parts of these areas will have enjoyed significant growth in houseprices over recent years.
The taskforce will be looking for two types of undisclosed profits:-
1) Taxable gains on sales of properties
2) Rental profits
The taskforce is likely to review the Land Registry's records of properties bought and sold and then match each record to the taxpayer's tax returns for that year.
There could be difficulties in relation to complications around Principle Residence Relief, for the taskforce, but there should be ways of working out from public records who has and who has not lived in a property that has been sold.
HMRC say that their previous Taskforces have been successfu; unearthing an undisclosed gain of £400k+ made by a Barrister and a property consultant who now has a criminal record because of undisclosed property profits.
If a taxpayer thinks that they may have a gain which has not been disclosed to HMRC, then all is not lost. The overall result will invariably be better, in terms of penalties and HMRC's general attitude, if a late disclosure is made. Also time can be taken to look at all the reliefs available to a taxpayer, to make sure the taxable gain returned is as low as possible.
The method of disclosure can be discussed before it is made, but the avenues available now include the Let Property Campaign which potentially provides better terms for disclosure.
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Principle???
Thanks (0)Property crackdown
I have little sympathy for these evaders. Still when they seek our professional help, its more work and fees for us.
David L
Thanks (0)Bit harsh ...
... many are not deliberate evaders, they are just not accountants. They think because they pay out more than they receive they are not making a profit, and I have found around 80% of the time that is the case, especially if they were tied in to expensive mortgages before the rates crashed.
Thanks (0)Complexity, Ignorance & .......
We had a sole trader client referral last year who had his tax return prepared by a national firm. It was a cheap and not so cheerful service with little interaction between the two. When I was preparing his 2012-13 return and reviewing the previous year's return prepared by the previous accountants many things didn't stack up in the property letting. The mistakes in the return were:
Declared unfurnished but was let furnished.
Mortgage payments were declared instead of interest only. It was a capital repayment mortgage.
Property was declared 100% in clients own name but was jointly owned with spouse.
The 2011-12 return letting pages could not be more wrong if they had tried. My client believes he told all this information to the previous accountants for which I cannot comment. If he did then that makes it worse. I managed to get a refund from HMRC for his 2011-12 return and the 2012-13 was submitted correctly.
Unfortunately for his spouse she was PAYE and had never submitted a SAR. I first obtained a UTR and then completed her 2012-13 SAR reflecting her share of the profit. For 2011-12 I used the HMRC Let property campaign to declare her share of profit. Built into this is a fixed penalty and interest which we have to calculate. All submitted and no repercussions.
2013-14 should be straightforward by comparison but you can never ever assume the client knows what they are talking about when it comes to property letting. There are a number of criteria which if got wrong, as this example shows, the results can be costly. You must ask the right questions and listen, neither of which the previous accountants apparently did.
Thanks (0)Need for professional advice
I specialise in caravan letting tax and I know that an enormous number of hirers do not declare their revenue, as they don't make a profit and believe it to be unnecessary.
They fail to identify tax advantages of carrying forward losses to the time when they do start making a profit, with the carried forward losses saving them having to pay tax for many years. Some of those that do their own returns are also reporting the losses under the wrong head, since their days let do no meet the criteria for the head they are reported under. I regularly amend those erroneous returns obtaining a refund for them and for the current year.
I also know of firms that are charging the equivalent of one hours work to complete the returns and some are making similar errors to those found by squay. These have come to light when the client moves to me. If they are only charging 1 hours work, they probably also don't liaise sufficiently with their clients and could make all sorts of errors in the rush to complete the returns within the chargeable time. If they aren't completing all their clients within the chargeable time, their practice could be heading for regular annual losses or the staff are not being paid the minimum wage or are sub-contracting the work to the third world.
I charge considerably more because I provide a service of consultation and advice as well as simply completing the tax return. On average, I provide some 7 hours to each client and have to charge accordingly but my clients get a much better service. My fees are based on a reasonable hourly rate.
I advise my clients from the start that HMRC deem all caravans owned by married couples to be jointly owned and direct them to HMRC guidance should their circumstances be different, when they may be able to complete an HMRC17 to contradict that deemed joint ownership.
I do have a considerable portfolio of clients who are happy to provide online references and who return year after year.
Thanks (0)