Chartered Institute of Taxation comments on today’s Office of Tax Simplification (OTS) report on property tax

Commenting on the Office of Tax Simplification (OTS) report on the income tax rules for residential property income published today (Tuesday), Leigh Sayliss, Vice-Chair of the Chartered Institute of Taxation’s (CIOT) Property Taxes Committee, said:

“The OTS has produced a comprehensive report that addresses many of the obstacles that currently face taxpayers in the residential property rental sector.

“We welcome that the report addresses some of the difficulties in adopting Making Tax Digital for property income, especially for overseas owners and in cases of co-ownership.

“The report highlights the lack of awareness by tenants – and difficulties even where the tenant is aware – of the non-resident landlord scheme combined with the out-of-date threshold for triggering the scheme. We suggest a review of this scheme may be helpful especially now that the register of beneficial ownership and the Annual Tax on Enveloped Dwellings (ATED) give HMRC more visibility of overseas property income.

“We also back the OTS’ call for measures that help taxpayers without needing changes in legislation such as better guidance to help taxpayers distinguishing between capital expenditure and revenue expenditure, giving practical examples.”

Leigh Sayliss, who is also a partner at Memery Crystal, continued:

“The report offers several ways in which to improve this area of the tax system.  However, the current focus of the Government is, understandably, on maximising revenue, tackling avoidance and recovering monies incorrectly claimed under the various COVID schemes. We are, therefore, concerned about how much resource HMRC will be able to put into implementing any changes at this time. If HMRC are not able to act on the report immediately, we still hope that the important messages it contains are picked up when the economic climate improves.

“The report highlights the role that the OTS can play in looking across different areas of HMRC, and include contributions from other departments, for example the Department for Business, Energy & Industrial Strategy (BEIS) proposals to raise the Energy Performance Certificates standards for residential properties being let. In the absence of the OTS, there is a question as to whether HMRC will have the resource and remit to take such a wide-ranging approach.

“If the Government is serious about ‘embedding simplification’ in the UK’s tax policy-making process, we consider that it should retain the OTS and consider strengthening it.”