Mervyn King (the darts player, not the ex governor of the Bank of England) has said he is bankrupt due to tax liabilities.
He seemingly spent many years collecting winnings not realising that “winnings” were taxable as earnings. The cynics reading will be asking him to pull the other one but it is surprising how often people simply mistakes and then double down on them.
What’s the connection to property? Well I wasn’t immediately sure but I was sent it by a reader to include and I like to do what people ask!
I’ll make a connection by linking back to my old favourite the “Property Rental Toolkit”. Question 1 in the toolkit is “Have all gross rents and other receipts from land and property been included as property income as appropriate?”
It goes on to emphasise that it’s not only rent but “other receipts”. They do this to make sure there is absolutely no confusion that money generated from property in any way is going to be taxable. There can be no doubt. It doesn’t matter what it is called.
Is also asked about “finance costs” even though most people only have mortgage interest that comes under this description. Again they are eliminating doubt.
They do this because English and Tax are not always the same language. Winnings for a darts player that makes a living as a darts player become earnings because that is what he does for a living (it’s quite complicated for the hobbyist that earns a little but this guy made a full good living for years).
Refurbishment, decorating, developing, building, business, partnership, repairing and many other words could be used by a landlord to mean one thing that is legally treated as another. That is why detail matters. Language matters.
Most of the time HMRC don’t cut taxpayers any slack because their guidance is purposely clear. The Property Rental Toolkit used to open with a warning about penalties. It did so because HMRC aren’t very forgiving about this type of mistake. Get it wrong and they will collect the tax, charge you interest and issues penalties on top. If you can’t pay them they will likely help publicise your inevitable bankruptcy as a message to others.