The National Residential Landlords Association (NRLA) is urging caution for landlords who manage their properties through limited companies. These landlords may need to demonstrate they dedicate at least 20 hours a week to their business operations in order to qualify for tax benefits.

Many landlords have incorporated their buy-to-let portfolios, seeking advantages like more favorable tax treatment on mortgage interest and potentially lower capital gains tax. However, concerns are rising about eligibility for these reliefs.

“There’s significant confusion about how landlords prove their companies qualify for incorporation relief,” explains Chris Norris, NRLA’s head of policy. “Landlords aiming for this relief need to demonstrate they spend at least 20 hours a week managing the business.”

Norris suggests some landlords might have overestimated the time they dedicate to property management, potentially jeopardizing their eligibility. This follows reports of HMRC sending letters to landlords, raising the possibility of higher corporation or capital gains taxes if they fail to meet the time commitment requirements.

The NRLA also advises landlords to avoid impulsive decisions when choosing between personal and limited company structures. Additionally, some experts warn that unqualified consultants might be promoting unrealistic tax benefits. An HMRC spokesperson clarified, “These are routine communications. We send reminder letters on various tax matters annually. The vast majority of taxpayers fulfill their obligations correctly.”