Property income review: call for evidence

Although AAT appreciates that having a single tax regime for all types of lettings would be simpler, given the often very different nature of a standard buy-to-let property business and a furnished holiday let, it appears reasonable that different tax regimes should apply to each.

With regard to changes of ownership and varying the percentages of ownership, AAT suggests this is an area the OTS may wish to explore further with a view to providing greater certainty and simplification to reduce avoidance.

AAT recommends that rent-a-room tax relief, which has not been increased in over six years, should be increased from £7,500 per annum to £9,500 per annum effective from April 2023. Thereafter it should increase annually in line with inflation (CPI).

AAT has long campaigned for the second homes loophole to be closed and welcomes the fact it will be reduced from April 2023 with a new requirement to make a property available to let for at least 140 days and actually let for a minimum of 70 days. However, AAT does not believe this change goes far enough and there should instead be a requirement for a property to be made available for a minimum of 210 days a year and for it to be actually let for 105 days. This would bring it into line with various tax reliefs and allowances that are available for furnished holiday lettings.

AAT favours breaking the link with the end of the tax year and requiring landlords to register within one month of letting activity commencing. At present, as it is tied to the tax year, obligations to register and declare rental income to HMRC can be required anywhere between 6-18 months (or as much as 22 months if already registered for ITSA for other reasons and having a new liability).

AAT opposes any plans for letting agents or platforms to become liable for the collection and remittance of rental income, whether on a voluntary or compulsory basis.

Given the wide variability of information provided by letting agents, platforms and holiday rental agency businesses, it would appear sensible to introduce some very basic minimum requirements for the provision of information to landlords. This is clearly very distinct from the provision of advice but nevertheless could prove helpful in easing administrative burdens for landlords and improving compliance.

AAT has repeatedly made clear that the £10,000 Making Tax Digital (MTD) threshold is inherently unfair and unjustifiable and should instead match the personal allowance (currently £12,570). Otherwise non-taxpayers will have to register for MTD and provide quarterly updates despite having no tax liability.

AAT strongly recommends that the Non-Resident Landlord Scheme be digitised at the earliest available opportunity. Paper forms (used for quarterly returns and annual certificates) are not just outdated but unnecessarily costly and inefficient.

For those who unwittingly or otherwise employ an unregulated accountant or tax advisor ie those who are not a member of a recognised professional body, who make up a third of the sector, the chances of receiving bad, inaccurate or misleading advice relating to the taxation of rental income is high. This is easily addressed.