Councils using ‘Intelligence’ to track down low EPC properties and fine £5,00015:08 PM, 29th March 2021
About 2 weeks ago 36
Many property investors fail to tell the tax man about their property businesses and face mounting fines and penalties.
Property investors run two types of business – renting and trading property. Each one has separate and specific tax rules.
A property rental business covers buy to let, houses in multiple occupation and holiday lets.
Rental property owners must tell HM Revenue and Customs that they have a new stream of income within six months of the date their first letting property is rented to tenants.
Then, they must keep good financial records showing rental income and expenses from the date of first letting until April 5 the following year.
After that, financial records are kept from April 6 to the following April 5 until the property business ends.
Rental profits or losses should be reported to HMRC on a tax return – a self-assessment return for individuals or joint owners. Companies have separate tax dates and returns.
If a property is sold, gifted or otherwise disposed of, each owner should tell HMRC by October in the year following the disposal and then submit the details on their return for the tax year covering the transaction.
Property traders have a different tax regime from landlords, but they still have to tell HMRC they have started a business within six months of the start of trading.
Generally, property costs are carried on their balance sheet as work in progress until a sale. Then, the sale proceeds and any costs brought forward are listed in the accounts.
Any profits or losses are reported on the self-employment or partnership pages of a tax return.
The key is good financial record keeping that shows whether a property is an investment or a trade.
Buy to let landlords or property traders who have not told HMRC about profits or losses from prior years should talk to the tax man and come to an agreement about filing accounts.
From August, HMRC will inspect the business records of 50,000 small businesses a year – including property businesses – and fine taxpayers who have failed to log income and who have not completed tax returns correctly.
Taxpayers who volunteer failing to file returns are going to be treated more leniently than those who are found out without offering the information.
Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.