The UK residential property letting market is rich and varied these days, with a huge range of people, from professional landlords to individual second home owners, deriving an often very satisfactory income from it.
The most recent government estimates are that there are up to 1.5m residential landlords. Many will have substantial portfolios and run their properties as a mainstream business. Others may have inherited a property, bought one for student offspring or entered into a personal relationship which meant one partner’s property was surplus to requirements and could be rented out.
Whatever the reason, all these rental properties have one thing in common - they earn money for the owners and are liable to tax.
The strong and unwavering spotlight of HMRC is being turned at the moment on landlords big and small who, by accident or design, have failed to fully declare all their rental income.
The Let Property Campaign, which is running currently, is the latest in a series of anti-tax avoidance measures being taken by HMRC designed to help people to bring their tax affairs up to date, keep them that way and stop them getting it wrong in the first place.
Since 2007, HMRC campaigns - on themes such as property sales, direct selling and undeclared overseas income- have collected more than £552m in tax from people who became compliant and more than £224m from a large number of follow-up activities.
There are a number of criminal investigations underway and seven people have been convicted already, with custodial sentences handed out of up to two years. Those convicted have between them had to pay more than £550,000.
Marian Wilson, head of HMRC Campaigns, 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.
‘We appreciate some people will have made honest mistakes, and some may not be fully aware that the rent from a property is taxable, and that is why it always makes sense to talk to us so we can help. It is always cheaper to come forward voluntarily and pay the tax you owe, rather than wait for HMRC to come calling.
‘Telling HMRC about your tax liabilities is simple and straightforward, and help, advice and support are available. The message for all landlords owing tax is simple – it is better to come to us before we come to you.’
Keeping affairs in order
The Let Property Campaign, which was announced last summer, started officially in December 2013 and it has at least 18 months to run.
When HMRC runs a campaign of this nature, landlords would be well advised to take it very seriously and make sure their affairs are in order.
The campaign is in the early stages, but it is gearing up steadily and there is little doubt that the investigative officers of HMRC will already have a substantial database of people with whom they would like to have a chat. HMRC will have obtained information from a variety of sources including letting agents, adverts (online and in the press) and also the Land Registry.
If landlords feel that they may owe tax - whether through a misunderstanding of the rules or for any other reason - now is the time act. It is important to remember that even if after deducting all your property expenses you are making a loss you still need to declare the activity to the HMRC. This will also allow you to secure these losses to be offset against any future profits.
The opportunity to come forward voluntarily is time-limited, but those who do so will obtain the best possible terms for any possible payments.
Click here to read the original article: "Convictions up for landlords failing to report rental revenue"
