British taxpayers renting out holiday homes overseas face business record checks by HM Revenue & Customs to see how well they are keeping their accounts.
The tax man will demand to see bank statements and other receipts and accounting information to see if property owners should submit a tax return to declare rental profits or gains from selling property.
Overseas property owners can expect a telephone call from HMRC to go through how they keep their records.
Owners who fail to persuade HMRC that they are keeping the correct financial records and are declaring any income or capital gains can expect a personal visit to scrutinise their paperwork.
Property investors will have three months to put their paperwork in order for the visit. If the records are not considered adequate, HMRC can issue fines and launch deeper tax investigations.
HMRC will check out every property business over a five-year period to make sure the correct financial details have been included on tax returns.
The campaign is part of a bigger business record checking project looking at small businesses.
Besides property investors, letting agents and holiday businesses will also be checked out.
Separately, HMRC has a task force sifting through databases and the internet to identify British taxpayers with property overseas.
Foreign tax authorities linked to Britain through more than 100 tax treaties will also pass financial information to HMRC.
Business Record Checks are a revamped version of a similar scheme that was cancelled after a trial in February 2012. This time, HMRC claims the emphasis is on educating property investors rather than penalising them.
Paying the right tax
The phone checks will start on November 26, 2012, in London and East Anglia and cover the whole country by March 2013.
HMRC’s Director of Local Compliance Richard Summersgill said: “We’ve listened to businesses and agents, and revamped our business records checks programme to make it more streamlined, targeted and better focused on education.
“The visits offer benefits for businesses at risk of keeping inadequate records. Adequate records help businesses pay the right amount of tax at the right time, thereby avoiding interest and penalties for errors and late payment, whilst also giving HMRC greater assurance when a business submits its tax returns.”
The pilot scheme visited 3,400 businesses between April 2011 and February 2012 and found 1,133 (33%) had record keeping problems, while 10% (113) received follow-up visits.
Download the HMRC guide to keeping business records – http://www.hmrc.gov.uk/factsheet/record-keeping.pdf