A few months ago PropertyQuoteDirect published a blog discussing how landlords can stay on the right side of the HMRC after the organisation announced that they would be cracking down on landlords who failed to pay their taxes. The organisation suggested that millions of pounds worth of tax is missing from the private rental sector, and much of this is down to the fact that inexperienced landlords are not filling in their self-assessment tax forms correctly.
At first, the HMRC said that they would be lenient on landlords who had failed to pay the right amount of tax, however now that the grace period has passed they have decided to escalate matters. According to recent reports a number of landlords will soon be receiving letters from the HMRC stating that they need to make contact with them in order to arrange their affairs or risk being investigated. If investigated, it is unlikely that landlord insurance would cover the legal costs, so landlords would have to pay for these out of their own pockets.
In order to step up their scheme to regain the £500 million lost each year in unpaid tax from the private rental sector, the HMRC have been using additional manpower and new tactics. Mark Giddens, a partner at auditing firm UHY Hacker Young, said: “It was not until April this year that the taxman sent out notices to letting agents in which they asked for details to be provided of everyone on their books. The housing benefit payments that go direct to landlords are also being monitored more closely.
“This information can be obtained through the local council’s records. By investing all this time and effort they have certainty stepped up the pressure on landlords who are not declaring enough, and the letters are the next part of that.” Simon Browning, another partner at UHY Hacker Young, added: “HMRC has really stepped up its game in terms of reclaiming unpaid tax, closing loopholes and ensuring that people are paying what they should over the past few months – and now they have turned the microscope onto landlords.
“We have seen an increase in the numbers of investors, particularly those based outside of the UK, securing property within the regions since the turn of the year as the property market has taken a turn for the better. Landlords will be receiving letters from the revenue asking for them to get in touch to discuss their affairs – or run the risk of a large fine or even criminal investigation.”
Lucy Brennan, a partner at accountants Saffery Champness, has claimed that the HMRC are also using social media in order to investigate landlords. She said: “Those who let out a holiday home will not be registered to vote at that address. The Revenue has increasingly been using social media to look into cases where a holiday home is, for instance, being advertised to friends to ensure that the right amount of tax is being declared on that property.”
So far thousands of landlords have come clean to the HMRC and paid back the tax they owe, however the organisation will not disclose the exact number. A spokesperson said: “All rent from letting out a residential property or holiday home has to be declared for income tax purposes. Telling us is simple and straightforward. The message for all landlords owing tax is simple – it is better to come to us before we come to you.” In order to encourage landlords to get in touch with the HMRC the organisation has set up a website called ‘Let Property’ where they can also use online tutorials on paying tax.
The letter which is being sent out to landlords owing tax states: “HMRC has data related to landlords and is comparing this with what individuals have or have not told us. This letter is the first stage following that process as HMRC is aware you are a landlord who is letting property and that you may be liable for tax on any income. We need landlords to call us within 30 days of the date of this letter – so if you receive one, please act and respond.
“If you do not and our information indicates you have not declared or paid the correct amount of tax, we will take action which could result in you paying a higher penalty or you could face criminal investigation.”
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