PROPERTY owners are facing a new tax investigation by the taxman, a leading accountancy body warned yesterday.
Anyone who does not declare income from renting out property risks being investigated by Her Majesty's Custom's and Revenue (HMRC), according to the Association of Chartered Certified Accountants (ACCA).
The warning came as the accountants body revealed that HMRC's compliance unit is this week issuing 500 letters to self-assessment taxpayers who it believes may be making money from buy-to-let.
In recent years the market has mushroomed with the value of outstanding buy-to-let loans now totaling more than 108 billion. It accounts for around 10 per cent of mortgage balances, up from 3 per cent five years ago.
Chas Roy-Chowdhury, head of taxation at ACCA, said: "Occasionally there will be legitimate reasons why tax has not been declared – in some cases, letting out property does not raise much income and people may feel they are not making a profit which needs to be declared.
"But tax rules for renting out property are confusing. The amount of tax payable depends on the type of letting."
The taxman is asking for details of income and expenses relating to UK property rental income for each year up to 5 April 2007, going back six years.
Neil Whyte, taxation partner at PKF business advisers and accountants, said: "There has been an explosion in buy-to-let in Edinburgh, in particular, in the last five to ten years. HMRC is likely to be targeting people who have built up portfolios of properties but have never declared this for tax."
A spokesman for HMRC said: "We are not planning a tax crackdown or to otherwise target landlords. These letters are about helping customers with their tax affairs and answering common questions put to us by our landlord customers.
"We do not regard the buy-to-let market as being any less scrupulous than any other."