In the last month, two items of news have emerged which may be of interest to second homeowners.
Firstly, HMRC have launched a “campaign” which will see thousands of letters issued to individuals who HMRC believe may have made a taxable disposal of residential property in 2018/19 without declaring it on a tax return. Typically, this will be a disposal of a property, such as a holiday home, which is not the owner’s main residence.
In many cases, the letters will be incorrectly targeted, so anybody receiving such a letter should take professional advice if they have made a sale but are unsure as to whether the disposal should have been disclosed to HMRC. Generally, where the seller makes a profit on sale in excess of their annual exemption (which was £11,700 in 2018/19) and/or the proceeds of sale were over £46,800, the disposal should have been reported to HMRC.
It is a common misconception that proceeds which are applied to repay an outstanding mortgage on the property would reduce the gain/proceeds to bring the disposal within these limits. It is also a myth that someone who is not already required to complete annual self-assessment tax returns has no obligation to report such disposals.
A similar campaign last year produced a 15% success rate for HMRC in terms of disposals which were reported as a result of these “nudge” letters.
Meanwhile, Airbnb UK have recently confirmed that they will share data with HMRC about the earnings of hosts on its UK platform in the tax year 2017/18 onwards. This will enable HMRC to cross check the information with income declared on tax returns; any hosts who are found not to have been correctly declaring their Airbnb income could find themselves the subject of a tax enquiry by HMRC.
Anyone who is concerned about these announcements or who wishes to check that they have been correctly reporting all property related matters to HMRC should get in touch with us.