Landlord structures back under the spotlight

HMRC Spotlights have been around for some time and periodically are added to. They are designed to shine a ‘spotlight’ on tax avoidance schemes that HMRC believe do not work, and which may have wider societal implications due to the number of taxpayers at risk of involvement in such schemes.

HMRC have recently published Spotlight 63a  Property business arrangements involving hybrid partnerships and indemnities concerning structures used by individual landlords to avoid paying tax on their property income by way of hybrid partnerships and indemnities.

The structures which are often referred to as hybrid business models, claims to:

– bypass mortgage interest relief restrictions, allowing increased deductions for mortgage interest

– reduce the amount of tax payable on profits from their property business

HMRC’s view is that these schemes does not work, and that landlords who use them could end up paying more tax than they tried to avoid, along with interest and penalties.

HMRC’s full list of Spotlights is published on GOV.UK