HMRC have published Property business arrangements involving hybrid partnerships and indemnities (Spotlight 63a). The guidance addresses a scheme used by individual landlords to avoid paying tax on their property income.
“HMRC is aware of a tax scheme being promoted to landlords as a way to structure their property businesses and reduce their tax bills. Sometimes referred to as a hybrid business model, the arrangement 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 this scheme does not work. Landlords who use these arrangements could end up paying more tax than they tried to avoid, along with interest, penalties and high fees.”
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