Property investors warned over HMRC levy

Property investors are being warned to be aware of an apparent push by HMRC to levy class 2 National Insurance contributions on rented property income, chartered accountants Saffery Champness have said.

Despite the fact that being in receipt of income from investment property does not qualify as earnings in the eyes of HMRC, 'or at least not until now', the company said.

Previous rulings have determined that passive investors or even those involved in active management of their let properties (such as advertising for tenants, making or organising repairs, cleaning, and collecting rent) are not liable to pay class 2 NI contributions. .

But now it has come to light that HMRC is arguing in a number of cases that income from rental property, irrespective of the level of management involvement, is a trigger for the payment of class 2 NI contributions.

Mike Harrison, Partner in the Landed Estates and Rural Business Group of UK top 20 Chartered Accountant Saffery Champness, says: "These incidents show an absolute reversal of the rules. Also HMRC appears to be engaging direct with property investors rather than through their appointed tax agents, or copying those agents in, with the consequence that those who feel most threatened or least equipped to dispute the demand are paying up.


"HMRC has also been asking for backdated contributions, in some instances going back four years, so while the sums are modest they are not inconsequential.

"We would urge anyone pressured by HMRC to pay class 2 NI contributions on let property income to consult their professional adviser as we believe that such demands are in most cases unfounded and should be disputed."