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Landlords targeted in HMRC tax clamp down

HMRC is demanding landlords hand over details of their properties and tenants even if they have declared rental income.

Landlords targeted in HMRC tax clamp down

HM Revenue & Customs (HMRC) has been criticised for its latest ‘scarily aggressive’ crackdown, which sees residential landlords targeted indiscriminately.

The taxman is targeting domestic landlords with information obtained from local councils to try and track down landlords evading tax by failing to declare rental income.

Landlords have received letters from HMRC requesting information on property addresses, letting periods, how many tenants are in the property and details on weekly and monthly rents. More personal questions about how rental property was acquired are also being asked, for example whether it has been purchased, inherited and gifted.

Mike Down, head of tax risk and investigation management at accountants Baker Tilly, said while clamping down on tax evasion was part of HMRC’s remit it is sending out letters to landlords before checking whether they are declaring rent.

‘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,’ he said.

‘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.’

Down said that taxpayers who have declared rental income under self-assessment returns are being asked to send out additional information under a formal framework and HMRC is ‘unnecessarily wasting the time of law-abiding taxpayers’, as well as its own resources.

‘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,’ said Down.

15 comments so far. Why not have your say?

peter montgomery

Feb 20, 2013 at 15:07

About time this was done and finding out about the ultimate source of funds used to buy these assets.How often does one hear of a drug dealer or similar cretton revealed as the owner of a small property empire ,where laundered cash has,somehow,filtered its way tnto the opaque property market.??

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Martin Drew

Feb 20, 2013 at 15:12

This approach reminds me of a company in San Francisco I did business with. They expanded too fast and totally lost control of their accounting so sent out threatening letters to everyone on the sales ledger. The Senior VP told me later that they upset an awful lot of customers, but collected 1.5 million dollars in 10 days. I expect HMRC will also upset a lot of people, but probably collect quite a lot of tax too.

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Dislexic Landlord

Feb 20, 2013 at 15:42

You must play the game by the rules

Property Investment is a bussiness but some landlords just dont bother playing by the rules

Its madness there is a paper trail all the way from buying a property to renting it

Good luck to HMRC I say I bet if there not declairing income from rent they will be brakeing all the other rules CP12,s EPC,s ect ect

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Feb 20, 2013 at 16:47

As a landlord, I welcome HMRC cracking down on those who don't pay their taxes. I make a little profit in one area and a loss in others, and the records are very straightforward albeit time consuming. That's what goes into my SA, and however much I resent paying HMRC for my risk, stress, and hassle when they take no responsibility, I pay whatever tax is due.

What I would resent is being asked to put yet more effort into substantiating my SA, when there are so many thousands out there they could so easily identify first.

HMRC should adopt the exception rule to achieve the maximum return, with the minimum effort, and the least cost, without angering those who pay their way.

All lettings agents will have records which HMRC can view. A simple cross-check between those receiving rental income and those who have/have not submitted a tax return should be the first cut which I suspect will throw up much more tax evasion than just property. If you aren't paying your tax on property, you probably aren't paying your tax in other areas.

HMRC can then look at Council Tax records to see who is renting, etc...

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Anonymous 1 needed this 'off the record'

Feb 20, 2013 at 17:27

I guess Tony Blair will be getting one of these letters.

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Feb 20, 2013 at 18:13

More of the Guilty Until Proven Innocent approach taken by ravenous tax authorities everywhere.

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rich banker

Feb 20, 2013 at 19:29

Typical of HMRC to target small fry landlords who perform an essential service often suffering large bad debts from feckless, scruffy moonlight flitting lazy and idle tenants, when they let the big multi-nationals get away with massive tax evasion in nature but pathetically allowed because HMRC cannot draw up avoidance rules to weed out these mega cheats who get away with Billions. Costa Coffee, Google & Facebook to name but a few.

Seems tax staff are in the wrong department if they have nothing more profitable to do. Whatever some people think most landlords deliver a value for money in a system that favours rental non payers, especially LHA tenants who cost the taxpayer billions.

What about the black economy of cash in hand builders, plumbers gardeners and the like and one also must mention expenses cheating MP's and huge cost in millions of the department needed to keep them on the straight & narrow that costs more than they were fiddling!

As well as fraudulent dodgy purveyors of horseburgers like T he E quine S upply CO mpany and Achtung Little Donkeys Inside.

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Feb 20, 2013 at 20:51

Provide them with the info, and where a repeat of information already sent, send them a bill, in the alternative a claim for damages harassment and stress caused for unlawful threats and menaces. If already provided, send a letter saying they already have that info, and don't put a stamp on it if they didn't provide an SAE.

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Feb 20, 2013 at 22:35

This is easily avoided by not having property to let.

Please keep this special tax avoidance scheme quiet. Further details can be provided on reciept of a cheque for ...etc etc

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Graham Barlow

Feb 21, 2013 at 09:54

I had cause to look into the ownership of a British registered Company, The share holder register revealed the shares held by a Dutch registered company. On looking into the Dutch holdings I found that they owned many shares in different UK companies. I then traced the shareholding of the Dutch Company, and this turned out to be a British registered holding company with a Japanese Parent conglomerate. When I looked at the accounts the Holding company had a turnover of £! Billion p.a. the declared profit on this amounted to £5 million and Tax paid £2 million. Now I dont know how many of these companies operating in Britain have been scrutinised by the HMCR by can think of several more without even looking. Britain has allowed so many Foreign controlled companies to operate in our economy, whilst only paying token tax on the total profits these being spirited away by management fees, and stock ownership in Switzerland and the l;ike. Now this official conniavance by Politicians in the first place for jobs is the real scandal, and details of approval have not been revealed. How much UK Tax does Nissan pay for example?. No, they would rather harris people who have put their hard earned savings into property. Well I have a warning for Politicians, because it has happened before . You make it a a harrowing ,and suspicious occupation being a Landlord, you will dry up the rented sector faster than you can imagine. The industry is currently huge, and providing accommodation to millions where the Politicians have spectacularly failed. Be very careful HMCR.

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Graham Barlow

Feb 21, 2013 at 10:38

I have a small property which I used to let out, but the amount of Tax levied on the rental income turned me off reletting it. I have had very good tenants ,but the hassle of finding good people and the maintenance and then the 40% Tax the game is not worth the candle. Now if I get demands from the revenue to know the details of whom is living in it Well I give up. Even though it is going to become my own residence , I wouldn't let it out again on principle. Pity the revenue didnt scrutinise the letting of Property bought by MPs with Expenses supplied by the UK Tax payer first. No we all know that this is the easy bit of Tax collection, the small individual can be picked off by the Revenue/ , but dont worry the middle classes are getting just as clever as the multinationals in their own way. |They can simply stop spending any money. They can give up the big revenue earners like Tobacco and alchohol. They can rearrange their portfolio of savings and dropout of the property market altogether. Dont worry there is more than one way to skin a cat , you ask any member of Parliament.

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Mr Robert

Feb 24, 2013 at 12:53

Your dead right Graham and it doesn’t stop with property rentals. I think a lot of people are thinking the same in other areas .Why should they risk money in investments or business ventures just to be plagued by bureaucracy in setting them up and running them and then taxing them into oblivion if they eventually make a profit. What with competition from the internet and the change in social trends I can see most of the small shops and business in many areas are just hanging on by the skin of their teeth with high overheads and low profits hoping for better times. Many are just staying open because they are tied to leases and are responsible for full business rates if they close. The greedy government has not a clue on how to regenerate small business and encourage entrepreneurship. All it does is push for more ways of getting maximum taxes in from the existing dwindling business. Meanwhile big business arranges its finances to avoid the taxes with slick accountants. It sickens anyone who understands running a business right off. The cash cows are running out of cash, milked to death and many more will be running dry and be forced to close.

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Feb 24, 2013 at 15:48

Is 'rich banker' careless, confused or simply muddleheaded including Costa Coffee in his few named mega cheats? It is part of Whitbread, which pays substantial amounts of UK tax. Perhaps he meant Starbucks.

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Bryan Jefferson

Feb 24, 2013 at 17:19

'Rich banker' doesn't like tenants or full stops either.

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Feb 25, 2013 at 04:46

I guess of course, they are after evidence of main residence to make sure they take their share of any capital gain when it comes to selling these investment properties, the tax from rent is hardly worth pursuing! Given that most of these portfolios belong to the grey hair brigade it won't be long before these portfollios will need to be wound up as their holders pop their clogs! But then again, having been hounded by IR35 for the last 10 years and to no avail, maybe it is yet another way to employer otherwise idle civil servants who would be better off surveying and scrutinising the benefit cheats!!!

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