New HMRC Letter Campaign: Landlords Incorporation Relief 2017/18

By Graham | December 13, 2023

Understanding the New Compliance Drive in Property Taxation

Table of Contents

Introduction: A Focused HMRC Initiative on Property Tax Compliance

HM Revenue & Customs (HMRC) has embarked on a crucial campaign, turning its attention to a specific sector of the property market: buy-to-let landlords. This campaign specifically addresses those who strategically incorporated their property businesses into limited companies in the 2017/18 tax year but did not report Capital Gains Tax (CGT) liability on their self-assessment tax returns. This move by HMRC highlights increasing vigilance in the property sector, emphasising the need for strict tax compliance and precise reporting.

At Mercian Accountants, we have a profound grasp of property taxation complexities. We are diligently following this development and are well-prepared to provide landlords with insightful analysis and practical compliance solutions.

HMRC’s Objective: Educating and Ensuring Tax Accuracy

HMRC’s campaign aims to enforce accurate tax reporting while educating landlords on the nuances of tax calculations. This strategy reflects HMRC’s evolving approach, utilising data and targeted communications to bridge gaps in tax reporting and compliance.

The transition of property businesses to a company structure has gained popularity among landlords, especially considering recent tax changes in the sector. However, the complexities of CGT and incorporation relief demand meticulous understanding and handling to avoid substantial tax liabilities, interest, and potential penalties.

HMRC’s ‘Nudge’ Letters

Central to HMRC’s initiative are the ‘nudge’ letters, targeting landlords who incorporated their businesses in 2017/18. These letters serve a dual purpose: educating landlords on their tax obligations, especially regarding incorporation relief, and prompting a review of their past tax submissions. This approach is not merely about tax collection but ensuring fairness and compliance across all taxpayers.

Understanding Incorporation Relief

Incorporation relief is a critical element in property business tax planning, especially after changes to interest deduction rules. It’s designed to assist landlords in transitioning their businesses to a corporate structure, potentially deferring CGT. This relief is influential since it directly affects landlords’ tax liabilities and demands accurate calculation and reporting.

HMRC’s 30-Day Response Window

Landlords receiving these letters have a 30-day period to respond. This deadline is crucial, as non-compliance or failure to respond can trigger further HMRC investigations and potential recovery of under-reported tax. Therefore, responding within this timeframe is essential for maintaining compliance and avoiding additional scrutiny.

Expert Guidance: Navigating Complex Tax Matters

Given the intricacies of these tax matters, seeking professional advice is paramount. At Mercian Accountants, we specialise in property tax, providing expert guidance to ensure accurate tax reporting and compliance. We assist landlords in evaluating their tax positions and responding effectively to HMRC’s enquiries.

Mercian Accountants’ Commitment to Landlord Tax Affairs

The HMRC campaign serves as a vital reminder for landlords about the importance of diligent tax management. Mercian Accountants is committed to supporting landlords through this process. Our team is ready to provide bespoke advice tailored to your unique situation, ensuring peace of mind in your property tax matters.

Contact Mercian Accountants today for comprehensive support in responding to HMRC’s campaign and safeguarding your tax compliance.