There are many expat landlords who moved from the United Kingdom for sunnier climes who have either let out their UK property or bought additional buy-to-let properties ...
After a concerted effort by HMRC, a number of these expat landlords are coming forward and admitting they have evaded UK tax whilst living abroad. However, they are facing severe penalties for not disclosing their profits and paying the tax they owe.
So, far, 248 overseas investors have come forward to admit tax evasion in the 2020/21 tax year. Many are UK expats who live abroad rather than actual foreign investors.
They are disclosing unpaid tax using HMRC's Let Property Campaign. HMRC has been sending out a number of warning letters to individuals it suspects have underpaid tax or paid non at all. They then have 90-days to work out how much they owe and pay it or risk a full investigation.
The number of disclosures by expat landlords fell by 36% during the pandemic, and this is thought to be because tenants have had problems with rental payments, so these landlords are feeling the squeeze themselves. In most cases HMRC is coming across, these are more accidental than deliberate, but HMRC is insisting their tax affairs are brought up to date.
There are a number of other reasons these expats aren't paying the right amount of tax, including:
- Offsetting a full repayment mortgage against rental income and underestimating their tax amount - Mistakenly allocating rental income to a spouse with a lower tax rate - Claiming for expenditure on properties that HMRC does not allow
HMRC are getting better at finding landlords who are abroad using global data-sharing tools to grab statements from foreign banks. It also monitors the Tenancy Deposit Scheme quite closely and cross-references this information to individuals.
For any expat landlord living out of the country, penalties can be even more extreme with some involving up to 200% of the tax owed. And that's in addition to the tax itself. My advice is to make a voluntary disclosure and pay less in penalties.
If you'd like to find out more about anything I've written here, do call me on 01908 774323 or leave a comment below and let's see how I can help you.