HMRC tax warning to landlords
The HMRC has issued a tax warning to landlords over a potential scheme to avoid taxes.
Various ventures that offer reduced tax bills have sprung up since reforms to the housing market that started in 2015, reports The Times.
Landlords were offered help to set themselves up as private companies to get around tax rules.
Now, the HM Revenue & Customs has issued guidance on this new scheme “being marketed as a tax planning option.”
Tax warning to landlords
The HMRC said: “The arrangements seek to avoid tax by allowing individual or joint property landlords to transfer their properties to a limited liability partnership (LLP) with a corporate member. The LLP then allocates profits on a discretionary basis to members.”
The government department added that some schemes were “cynically marketed as clever ways to pay less tax. The truth is they rarely work in the way that promoters claim and it is the users that end up with big tax bills.
“Tax avoidance deprives the exchequer of funds to deliver vital public services. HMRC will take action where arrangements are designed or marketed to pay less tax than should be.”
Dan Neidle, the founder of Tax Policy Associates TPA and former head of tax at the multinational law firm Clifford Chance, said: “Many landlords — rightly or wrongly — see the increased tax burden on them as unfair. That has created a market for promoters selling magic solutions that claim to save landlords large amounts of tax. There are no magic solutions. We would advise steering clear of people that offer them.
“Tax should be boring, and the wisest approach is to keep it simple and do what everyone else is doing. Look for a firm with experienced people with tax qualifications, not a firm of flashy salesmen.”