HMRC is warning landlords against a specific tax avoidance scheme that claims to convert rental income into non-taxable loans. This scheme is under investigation and poses serious financial risks. Promoters suggest landlords can receive their rental income back as a loan without paying tax, but HMRC says this setup does not work and treats it as tax avoidance. Details of the warning can be read on the ICAEW website.
How the scheme is structured
The scheme involves transferring rental income into a trust or third party, who then returns the funds to the landlord as a loan. These loans are never repaid and are not considered legitimate. HMRC clarified that these payments remain taxable and warned landlords involved could face backdated tax bills, penalties, and interest charges.
There are safer alternatives.
Rather than using such questionable arrangements, landlords should explore legal and transparent ways to manage tax. These include owning property through a limited company, claiming allowable expenses, or using capital gains tax allowances. At Care Accountancy, we guide landlords on compliant tax strategies tailored to their portfolio.
The risks outweigh the benefits.
Using tax avoidance schemes can be costly in the long term. HMRC’s Connect system detects irregular financial activity, and even those who joined the scheme in good faith may still be liable for unpaid tax. Getting involved in such a scheme could harm your financial future and reputation.
Seek advice before it’s too late.
If you’re unsure about a tax arrangement or have been approached by scheme promoters, speak to a professional. At Care Accountancy, we help landlords navigate tax laws safely and smartly. We aim to help you grow your property income without risking falling foul of HMRC.
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