HM Revenue and Customs (HMRC) has played down press reports this week suggesting that buy-to-let landlords face a campaign to reclaim unpaid taxes. The reports said that HMRC has identified some 80,000 buy-to-let investors who may be liable to extra tax payments on their properties. One reason for the failure to pay the correct amount of tax is that some investors may have believed mistakenly that the whole of a mortgage repayment can be offset against profits on rental income for tax purposes. In fact, it is only the interest payable on the mortgage, not the capital repayment, that is deductible. A piece in The Times said that HMRC would be drawing on information from banks, tenants and letting adverts as part of its campaign. HMRC, however, has issued a statement denying that it is planning a tax crackdown in the way implied by the reports. Instead, it is intending to provide landlords with guidance and help. The statement said: “HMRC is planning to take a concerted approach to helping landlords of all descriptions (not just in the buy to let market) to understand and comply with their tax obligations in what they recognise to be a complex area. In taking this approach the explicit presumption will be that the majority of landlords want to make a correct return but that many may need some help to understand exactly how to do so. The approach, which was outlined to agent representatives in a recent workshop, will focus on giving landlords improved access to guidance and support so that they can understand how to calculate their own tax liabilities and, where there is tax to pay, using the lightest possible touch to ensure that the correct amount is paid.” The buy-to-let market has mushroomed in recent years as more people have taken advantage of a relaxing of the rules on purchasing rental property as an investment. It is estimated that there are now some 400,000 buy-to-let landlords in the UK.
