Around a third of buy-to-let landlords could be dodging their tax on their rental income at a cost of £550m to the taxpayer, new figures reveal.
Some 1m private landlords have failed to declare any revenue in the past tax year, in contrast to the 1.9m that did, investigative news agency Exaro reports.
Those evading tax could face a crackdown from HMRC in 2013, following an announcement from the tax authority late last year that it was launching a special taskforce to target private landlords, initially in the south-east, to include those that are letting properties out and not disclosing the income on their tax returns.
HMRC estimates the evaded amount to be around £550m a year.
Richard Murphy, head of Tax Research LLP, said the issue was a ‘massive sideline industry’ that HMRC should tackle as it ‘would pay for a quarter of their staff’.
‘One way round it is to require everyone to fill in a tax return,’ said the ex-KPMG accountant. ‘Is that unreasonable? Not in my opinion. It’s obligatory in most European countries.’
Murphy also suggested another way to unearth tax cheats is to compel people who rent their property to name their landlord or letting agent when they fill in their annual Council Tax rates assessment.
But he stressed the most effective way to increase the compliance rate is when ‘people believe they will be caught’.
An HMRC spokesman said: ‘Nearly a billion pounds has been made available to us to tackle tax dodging and we expect this work to bring in an extra £22bn by 2014/15. Some of this will come from the minority of landlords who are currently dodging their tax.’