The tax authority has launched thousands of investigations into those who make money from short-term rental properties.
Personal finance experts have issued a warning over rules concerning holiday homes that could result in hefty penalties if broken.
Those who fail to meet their tax obligations risk serious consequences, including fines equating to 30 per cent of outstanding tax owed. Depending on the situation, serious cases can see people be handed prison sentences of varying lengths, ranging from five months to seven years. "In the previous year, the number of inquiries was 400, so it's clear that taxpayer scrutiny is increasing rapidly. Given the increased attention from tax authorities, it's important for taxpayers to make sure they are meeting their tax obligations.”
"Owners should calculate their taxable income by deducting allowable expenses such as property insurance and maintenance costs from their total rental income. It’s important only to claim legitimate expenses that can be backed up by evidence to avoid issues during tax audits. "It’s important for owners to understand allowable expenses since they significantly affect taxable income from rental properties. Allowable expenses include various costs like mortgage interest, utilities, and advertising, but it’s important to differentiate between allowable and non-allowable expenses. For example, costs related to property improvements or personal use are not allowable and cannot be deducted.
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