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HMRC renews tax crackdown on holiday let landlords

UK: HM Revenue & Customs [HMRC] has launched a renewed crackdown on holiday lets investment after it was revealed that the tax authority had opened almost 2,000 investigations into landlords letting out their properties via short-term rental platforms over the last tax year.

It came after The Daily Telegraph submitted a Freedom of Information request to HMRC. The latest figures are five times the 375 investigations that were held in the previous year [2022-2023] and 20 times up on the 95 investigations in 2021-2022, as per official data.

A spokesperson for HMRC told the newspaper that it is specifically targeting homeowners who are not declaring income from rent.

They said: “The short-term property rental market is growing fast and it’s our role to ensure owners pay the right tax, creating a level playing field for all. We have dedicated specific resource to opening enquiries where there is evidence that those renting out holiday lets have not declared income.”

Two months ago, Chancellor Jeremy Hunt’s Spring Budget abolished the furnished holiday lettings tax regime, thereby scrapping tax relief for holiday lets, in a bid to improve the availability of long-term rentals in the UK. Mr Hunt warned that the regime until that point had created a “distortion” where there are not enough properties for long-term rental by local people in their communities.

The preferential tax regime for holiday lets, which includes income tax reliefs for costs incurred from furnishing properties and the ability to reduce capital gains tax in certain circumstances, will be a nationwide measure across the UK and take effect from April 2025. According to a recent report in The Sunday Times, the scrapping of tax reliefs on furnished holiday lets could bring in an additional £300 million a year for the Treasury.

In addition, the Treasury and Office for Budget Responsibility [OBR] have agreed on a reduction of the higher rate of property capital gains tax for residential properties from 28 per cent to 24 per cent to increase revenues and accelerate transactions in the UK.

This week, UK Prime Minister Rishi Sunak called a general election to be held on Thursday 4 July.

This means that a petition to ‘Reverse Government plans to abolish the Furnished Holiday Lettings tax regime’, launched by Holiday Cottage Handbook founder James Varley, will have to close at 00:01am on 30 May once parliament is dissolved for the general election. At the time of writing, the petition has attracted 5,204 signatures to date.

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