Consultation documents released by HMRC on 9th July confirm the Taxman's intention to target residential landlords in an attempt to triple the amount of extra tax raised from UK landlords.
The move could force letting agents and others to hand over names and addresses of landlords, past and present. Currently the Revenue can only demand data on landlords who use an agent to receive rent. According to the Revenue the new proposals would allow HMRC to make sure that people with income from letting property pay the right tax.
According to The Times newspaper "the Revenue sifts through classified advertisements and scours Land Registry data to find undeclared properties. It has also set up a whistleblower hotline and at one stage offered landlords an amnesty on penalties to encourage them to come forward. It has also targeted 80,000 landlords who wrongly claimed a refund for their mortgage payments".
The Times goes on to say "Tax evaders who have not come forward and are discovered could face penalties amounting to 100% of tax owed for up to six years, and could be prosecuted". Click here for The Times article.
The Revenue's Property Campaign has already netted more than £100 million. The Revenue believe that there is at least another £200 million to be had from landlords. However when we alerted landlords to the Property Campaign last year we were contacted by several landlords who told us that in their opinion the Revenue had bullied them into paying tax. The story seemed to be roughly the same in each case. The landlords were presented with a demand for a relatively small amount, in the region of £100. Because of the cost involved in fighting their case they had chosen to pay the Revenue's bill rather than fight.
One landlord told us it was a straight choice between spending over £1,000 to fight the demand or paying the £100 that his Accountant assured him was not due. He chose to pay the £100, but as you can imagine he was less than happy.
We are also aware that a large number of landlords do not complete their tax returns correctly, especially so-called 'reluctant landlords'. These are generally people who have been unable to sell their homes due to the current economic conditions and have chosen to rent their property for the time being. Our surveys indicate that many of these landlords not only fail to make correct tax returns, they are also less likely to have an EPC, to have gas safety certificates or indeed comply with other legislation.
It is correct that these landlords should be made to adhere to the same standards as 'professional' landlords. Our worry is that it always seems to be the 'professional' landlords who suffer. Just like the Government proposals to register all landlords (see previous posts in this Blog) it is likely that honest landlords will be targeted first and that many 'non-professional' landlords will slip through the net. Honest landlords end up paying more tax, directly or indirectly, they have to bear more costs to comply with legislation and therefore end up making a smaller return than these other landlords. Or, honest landlords are undercut by these other landlords who have smaller costs because they do not pay tax on their rental property or incur costs complying with legislation.
If the Revenue could guarantee that they will target and catch these 'other' landlords and at the same time force them to comply with the rest of the legislation that affects honest landlords we would support this initiative. Sad to say, we believe that this is unlikely to be the case. In our opinion is it is likely that it will be honest, professional landlords who will be targeted simply because it is too difficult to target landlords who are expert at 'staying below the radar'.
For more information about the HMRC proposals click here HMRC consultation document.
If you have any comments you would like to make you can make them on our forum The Landlords Club. You can also contact NetRent.co.uk by email at firstname.lastname@example.org or use this form Contact NetRent.co.uk.
We would welcome your comments.