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HMRC mulling 'easier' tax regime for small-scale buy to let owners

HM Revenue & Customs has launched a 12-week consultation on a proposal which it claims simplifies the tax demands levied on small-scale buy to let investors.

If the proposal is agreed, landlords with annual business income - that is, rent - below £10,000 will not be required to keep their business records digitally or provide quarterly updates to HMRC but they will still be able to use the so-called ‘optional cash basis’.

This system is likely to be introduced in the Finance Bill 2017, for implementation in 2018 or later.

As part of a wide-ranging digitisation programme called Making Tax Digital, HMRC had been expecting most businesses, including landlords, to use specialist software or apps to keep their business records, and to submit a summary of these quarterly.

The cash basis option will only be available to the simplest property businesses, such as individuals and partnerships where all partners are individuals.

However, a statement from HMRC says: “The option to use the cash basis will make budgeting for tax easier for landlords allowing them to better manage cashflows”. 

Under the cash basis, landlords would only need to declare income on rent actually received; landlords using the digital quarterly accounting alternative would have to include the income tenants should have paid as income for that year - even if, for whatever reason, that rent had not been paid. 

The closing date for comments is November 7 and you can see the full document - all 28 pages of it - here. 

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