The CIOT has recently published an article regarding letters to tenants occupying UK residential property owned by non-resident corporate landlords.
The CIOT has recently published an article based on a conversation with HMRC about these letters to tenants. The letters are in the form of a four-page questionnaire. If no reply is received, HMRC are going to register the property for the Annual Tax on Enveloped Dwellings (ATED) charge and issue the offshore landlord with a tax determination.
Click here to access the article published by the CIOT.
Who is this relevant to?
Potentially anyone who has invested in UK property through a non-resident vehicle.
Why is this important?
HMRC want to establish whether any rental income paid in respect of the UK property owned overseas has been correctly declared, for the past and for the future. The four-page questionnaire asks for various details including the name of the tenant, landlord/owner, rent paid, date property was acquired, name and address of the trust if owned by a trust, name and address of the settlor and copy of the trust deed if held.
In addition to any rental income, it is likely that HMRC will also wish to consider any associated UK tax risks connected to the property and the wider ownership structure, e.g. whether a beneficiary of a trust that ultimately owns the property is residing in the property rent free and how the property was funded etc.
What action should be taken?
Landlords may wish to communicate with their agents/tenants who might be in receipt of the HMRC letters.
We recommend that a response is submitted to HMRC by the owner of the property that addresses the points in HMRC’s letter. Prior to responding, consideration should also be given to whether there are any wider tax risks associated with the structure which may require disclosure or amendment; which in turn could lead to Failure to Correct (FTC) penalties. FTC penalties start at 100 percent of the tax (subject to having a reasonable excuse).
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