Tuesday, 26 February 2013

HMRC Attack on Landlords Ignores the Tax Inquiry Rules

This article has been provided by George Bull, Senior Tax Partner at Accountants Baker Tilly:

Armed with information provided by a local council, HMRC is now targeting domestic landlords in an attempt to track down those evading tax by failing to declare rental income.

Letters issued by the department are looking for information on addresses of properties, periods let, and the amounts of monthly or weekly rent involved, as well as asking a string of further questions such as how each property was acquired (e.g. purchased, inherited, or gifted) and even the number of tenants in each property.

Clearly it’s good to see HMRC cracking down on tax cheats, but we do have real concerns over what appears to be the non-risk-based approach of this campaign. What’s even more shocking is that telephone staff at HMRC are openly admitting that the probing letters are being issued without the department having first checked whether the landlord is in fact fully declaring the rents on their annual tax returns.

Quite aside from the fact that questions asked of taxpayers who have completed returns under Self-Assessment must be made under the formal and time-sensitive enquiry framework, it seems that HMRC staff are unnecessarily wasting the time of law-abiding taxpayers, as well as their own valuable people resource.

Surely it’s time HMRC were more careful with their precious resources and invested time in carefully checking third-party information before sending what might be viewed as scarily aggressive letters to those who are fully tax compliant?