The HMRC has announced one last chance for landlords who fail to declare all their rental income to come clean – or else take the consequences.
HMRC estimates that up to 1.5 million landlords may be underpaying up to £500 million in tax every year. Under the Revenue’s Let Property Campaign, landlords who may owe tax – whether through misunderstanding the rules or deliberate evasion – can come forward and declare any unpaid tax, although they will have to pay possible penalties and interest.
The Revenue says it will be “working with a variety of bodies over the next few months to develop tools and guidance to support landlords of all types and help them get their affairs up to date.”
HMRC says it will use information it holds about property rental in the UK and abroad, along with information already held on its digital intelligence system Connect, to identify people who have not paid what they owe.
This is also likely to include cross-referencing letting agents’ returns with those of their landlord clients. For investors that fail to come forward, higher penalties – or even criminal prosecution – could follow.
Estate agent Leaders’ technical and compliance director Carole Charge said: “HM Revenue and Customs (HMRC) is currently targeting residential landlords by means of its Let Property Campaign in an attempt to recover the £500 million it believes is being underpaid each year in the sector. It has been writing to letting agents demanding details of rents collected on behalf of landlords for the tax year ended 5 April 2013.
“So if your tax affairs are not up to date and you owe tax on your letting income, you now have the opportunity to make a voluntary disclosure via HMRC’s Let Property Campaign helpline on 03000 514 479. Landlords who do so will have three months to calculate and pay what they owe and will receive the best possible terms. If they do not they could face hefty fines or even criminal prosecution.
"To avoid paying too much tax, landlords need to be aware that certain deductions are allowable when their property is being let or is available for letting. You should consult a qualified accountant or HMRC for specific advice regarding this, however as a general guideline, landlords are permitted to make certain deductions from their rental income before calculating profit.”