16:34 PM, 16th May 2023, About 10 months ago
The likeliness of HMRC opening “Compliance Checks” into the accounting of Hybrid LLP’s operated by property rental business owners is now at an all-time high.
HMRC could simply target all LLP’s registered at the office addresses of Accountants known to have filed tax returns incorrectly for other their clients. However, given the levels of incorrectly declared profits and underpaid tax at stake, HMRC are likely to ‘cast their net’ much wider than that.
We suspect that HMRC will send what appears to be a very simple letter to all Members of Hybrid LLP’s (and their tax Agents) to request a copy of the full LLP accounts.
It will take a trained tax inspector less than a few minutes to find clues that tax has been misreported. This will then lead to full investigations being opened.
What to do if you are operating your property rental business within a Hybrid LLP
Within the next month or so we will be inviting people who have completed and submitted the form below to attend a webinar hosted by Property118 and Cotswold Barristers with the following Agenda:-
To make it viable for us to run this webinar we need at least 50 people to register their interest. Therefore, if you know of anybody else who might be affected please let them know. If we do not receive that level of interest within the next month or so we will have to reconsider how to progress matters. Our objective at this stage is to keep costs to a minimum.
Please note that we do not have the human resources to speak to you on a one-to-one basis about your case at this point in time, but you are welcome to post questions in the comments section below and we will do our best to answer them.
If you think you might be affected …
We want to help you.
It is extremely important you don’t panic or act in haste, which could make things worse for you. Below is some initial practical advice.
Mark Smith, Head of Chambers at Cotswold Barristers said …
“This is not a knee-jerk reaction or an attempt to undermine other advisers’ work for the sake of it. Believe me, we are busy enough with our own clientele.
Our Hybrid LLP Action Group arises from a number of landlords approaching us with concerns about the robustness of their structures and the correctness of the filings at HMRC and Companies House made in their names.
We cannot sit on our hands when landlords have major problems in their business structures, and these issues are compounding year on year. We have had discussions with one of the major purveyors of this structure, and we agreed to differ. So we have had attempts to work together, but these have been frustrated by lack of transparency by the other advisers, so we were left trying to reverse-engineer what had been put in place.
It is only recently that we have been able to look under the bonnet as it were, with the landlords who have approached us and shown us in detail what has been done in their names, The article is a result of this. It is not guesswork or keyboard-warrior posturing, it is real life for these people and many others. We would have liked nothing more than to have realised that this structure worked as implemented, and no landlord would be in difficulties, but sadly that was not the case.”
Neil Patterson, Managing Director at Property118 Limited said …
“For anyone with a Hybrid LLP it is only a matter of time before HMRC open an investigation into the reporting of their accounts. I believe we have a moral obligation to warn those people. How they react to those warnings is for them to decide.”