A leading tax, accounting & business advisory firm says landlords who ‘morphed’ into companies are now being investigated by the HMRC.

Image credit: iStock

The firm warns that this is the HMRC’s latest campaign to make sure all tax accountabilities are correctly reported.

A spokesperson for the firm, says: “Landlords who incorporated their property business but have not reported a capital gain on their 2017/18 self-assessment tax return are being sent a ‘nudge letter. Incorporating a property business is an integral element of many of the schemes marketed to landlords significantly impacted by the restriction of interest when calculating the income tax payable on rents received from properties held personally.”

The tax consultancy says the Revenue’s nudge letters ask the tax payers to make absolutely sure they have calculated their tax relief correctly and refers to specific HMRC guidelines on technical areas and reliefs available. Landlords have just 30 days to reply.

But if the landlord fails to do so within the timescale they could be liable to undergo a full tax enquiry and possibly being issued with a discovery assessment by the Revenue.

The firm says landlords who receive such a ‘nudge’ should contact and discuss the matter with their tax advisors immediately.

The spokesperson adds: “I would also recommend that those who have transferred their properties since 2017/18 to a company should take steps to review the ensure that they have correctly reported any capital gain that was realised on the transfer, as I expect that they will be the next recipients of an HMRC nudge letter.”

In October the HMRC took the unprecedented step of issuing a warning about the hybrid business model scheme of a partnership and a company, and any landlord who have used the scheme should be best to withdraw from and straighten out their tax affairs quickly.