Thursday 21 February 2008

Tax Man to clamp Buy to Let Mortgage Investors

With the United Kingdom facing the most substantial budget deficit in the coming year than any other nation in Western Europe, HM Revenue and Customs has announced plans to extract additional taxes from approximately 80,000 landlords who may not have paid enough in taxes over the course of the past six years on their buy to let mortgage investments.

Generally, the Revenue will be looking at three classifications of U.K. buy to let investors when it comes to questions about due and owing tax liability:

- landlords who have claimed too much tax relief'

- landlord who have failed to declare rental or lease payments received from properties

- capital gains that were realized on the sale of buy to let investments

In dealing with the situation involving these buy to let mortgage investors, the Revenue has the ability to go back and collect taxes deemed to be delinquent for a period of six years. Moreover, the Revenue has the ability to impose penalties at its discretion that can equal the amount of taxes determined to be owing and unpaid. Finally, the Revenue can also charge interest on these amounts.

Beyond these investors, a group of so-called “ghost landlords” will also be targeted.  These are property owners who have not declared themselves officially as the owners of real estate.

There is some recognition on the part of officials with the Revenue that the laws governing tax related issues and but to let mortgage property can be complicated and confusing in the manner in which different provisions impact one another. Officials realize that some property owners have made honest errors in computing their tax obligations. Therefore, the first step that will be taken in regard to dealing with potential tax obligations and these property owners will be the release of information booklet to them to assist in explaining the tax requirements.

Over the course of the past ten years, buy to let mortgage financing has been easy to come by.  Additionally, the housing market generally in the U.K. has been robust and thus attractive to investors.  In Britain today there are more than 400,000 buy to let landlords.  Nearly £95 million was borrowed by these investors in 2006 alone.  The outstanding buy to let mortgage loans are now at £9.5 billion.

As was noticed, the Revenue does believe that most of the buy to let landlords who may owe taxes at this time are not tax evaders as such.  Therefore, the Revenue is offering to these property owners a 90 percent reduction in the usual penalty assessment if these individuals voluntarily deal with their tax liability before June 22.  The Revenue hopes that many buy to let investors and property owners will take advantage of this amnesty period and deal with their past due tax obligations by this point in time.

Landlords in Britain are said to be facing a capital gains tax obligation that tops £4 billion according to Landlord Mortgages which is a mortgage broker that specializes in buy to let financing.  According to Halifax, Britain's largest home mortgage lender, the average price of a home in the country in 2006 was approximately 180,000 pounds sterling.

Compare over 8,500 mortgages to find the best deal for you