The Great Landlord Receipts Rip-off is Underway

by Property118.com News Team

13:35 PM, 4th January 2012
About 7 years ago

The Great Landlord Receipts Rip-off is Underway

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The Great Landlord Receipts Rip-off is Underway

The great landlord receipt rip off is underway again as property investors scurry around to find expenses to off set against their rental profits.

The common scenario is probably being repeated in homes and up and down the country.

The classic conundrum for landlords is a tradesman comes around to quote for work and gives two prices – one for cash in the hand and another plus VAT.

The temptation is to pay cash and save 20% on the cost.

The problem is a tax inspector will look at a claim for £5,000 for fitting a new kitchen and will call for the receipts.

The landlord can’t provide them, so the expense is rejected by HM Revenue & Customs leaving the landlord to pay an extra £1,200 in tax as a basic rate taxpayer or £2,400 as a higher rate taxpayer (40%) – negating any saving on VAT.

Landlords need to get real about the true cost of cash tradesmen – there is no saving for the property owner. The only person laughing all the way to the bank is the tradesman who pays no income tax or national insurance on their hourly rate for the job.

Many landlords will include the costs in their accounts, but they are in for a rude awakening as HMRC investigators are visiting up to 50,000 small businesses a year to check their financial records – and they reckon 12% are making expense claims they cannot support with documentation.

The investigators are looking back five years and can fine landlords and other businesses up to £3,000 for failing to keep proper accounting records.

The classic riposte from a landlord is that they have put the claim in previous years and the tax man has not come back.

The trouble is the rules have tightened up and special units are looking at landlord tax. The odds are every landlord will have a tax inquiry within six years of starting to let property – and the review will even look at accounts for properties that are no longer owned.

Many landlords will also give the excuse their accountants have passed the expense. The truth is the accountant probably has not seen all the receipts and expects the landlord to provide the documentary evidence if the tax man comes calling.

The great landlord receipts swindle is just that – a collaboration in tax evasion by helping a tradesman trouser cash that he should pay his dues on.



Comments

Ian Ringrose

12:21 PM, 5th January 2012
About 7 years ago

"The classic conundrum for landlords is a tradesman comes around to
quote for work and gives two prices – one for cash in the hand and another plus
VAT."

 

All good citizens would do their duty and report the tradesman var http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/ContactOrDealWithHMRC/DG_10010579,
as every time you do not, it is another child that the NHS cannot afford to
make better! 

 

Anyway how can you trust a tradesman to tell you the truth when they
have just made clear that they are not trustworthy?

Alan Loughlin

11:45 AM, 6th January 2012
About 7 years ago

but surely the best route is to opt for the 10% system and then no receipts are needed and we are then free to negotiate the best deal with the tradesman, 10% of rental income for me is more than we spend so a double gain.

Mark Alexander

11:57 AM, 6th January 2012
About 7 years ago

Alan, are you referring to depreciation allowances for fully furnished lettings only?

Alan Loughlin

12:09 PM, 6th January 2012
About 7 years ago

yes, all ours are furnished so this applies, we have never as yet spent anywhere near the 10%, this is taken from gross rents so is very worthwhile, and no need to keep any receipts.

Alan Loughlin

12:12 PM, 6th January 2012
About 7 years ago

As far as I understand there are 2 options, the blanket 10% or against receipts for payments made, am I correct

Mark Alexander

14:28 PM, 6th January 2012
About 7 years ago

My understanding is that the 10% allowance for wear and tear (as a percentage of rents) rents is only available to fully furnished lets and as Alan has commented there is then no reason to keep receipts although I would suggest you do in case you spend more than the 10% in any year. Receipts for repairs are allowable whether the property is fully furnished or not. Note I am not an accountant so please take professional advice or consult HMRC with any questions you need a professional opinion on.

10:58 AM, 14th January 2012
About 7 years ago

This is just another way the inland revenue to gain more money and top up their coffers . I just employed a roofer along with my neighbour to do some repairs what an abortion that was , recommended by the neighbours son who works in an estate agents , had I know this from the start I would of said no thanks.Any way this guy agrees to do the work for £3000 after a day and half he was finished , got the invoice LTD co and all, charged for VAT ,hay presto no VAT no at bottom of bill who's fault is this then not mine I can assure you ,DO YOU REPORT HIM OFF COURSE YOU DO .Keep all your receipts yourself even make notes on those that charge you and gives no receipt ,pay by cheque ,by card proof of payment keep all the receipts even those you have allowed them to buy on your behalf ,write a note explaining the cost with name and address of the person taking the money .


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