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Rental income from overseas property

Rental income from overseas property declared by UK taxpayers jumped 17% last year

• More taxpayers are coming clean on undeclared income from property
• HMRC is now automatically collecting data from French, Italian, Portuguese and Spanish bank accounts

The amount of rental income from overseas property declared by UK taxpayers to HMRC jumped dramatically following a series of tax investigations campaigns by HMRC aimed at forcing better tax compliance amongst owners of holiday homes, says Peterborough-based accountants and business advisors, Moore.

The amount declared to HMRC increased by 17% to £912m last year, up from £781m in 2018/19. The number of individuals declaring rental income from overseas property increased to 81,000 last year, up from 78,000 in 2018/19. The rise in declared income from overseas property suggests that HMRC’s tactic of using the increased threat of tax investigations as a credible deterrent are working. HMRC has also been bulk mailing warning letters to taxpayers that have income from offshore assets, such as property.

These letters warn that HMRC knows a taxpayer has offshore assets and asks them to confirm any income that they receive HMRC identifies taxpayers with offshore property through requesting data, such as foreign bank account statements or mortgage statements, from 100 overseas authorities. HMRC also collects data fromUK based websites that advertise overseas holiday rentals. Investigators from HMRC also monitor the social media accounts, like Facebook or Instagram, of people they suspect of owning an overseas rental property for evidence.

Penalties for undeclared property income from holiday homes is up to 200% of the amount of tax HMRC believes is owed. Matthew Grief, Associate at Moore, says: “HMRC know that the British have almost as strong a love affair with owning holiday homes as we do with traditional BTL.” “They’re determined that any income from letting out property overseas is properly taxed. They have been putting owners under more and more pressure and that is paying off –declarations of rental income are going up at quite a clip.”

“They’re wise to do that as the ability of HMRC to identify owners of holiday homes is becoming ever more precise just from a process of data mining all the information they receive directly from banks and financial institutions in countries like Spain, France, Portugal and Italy.”

“The fines that HMRC can impose are very painful. One way out is to make a voluntary disclosure to HMRC. Although this does not give you immunity from investigation, HMRC will be more lenient towards you.”

For further advice on the tax implications of owning holiday property either in the UK or abroad, please contact Moore on 01733 397300.

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