The tax agency, HM Revenue & Customs (HMRC), has strengthened its crusade against crafty landlords, with plans to send roughly 40,000 letters to those parsimonious proprietors alleged to be skipping out on tax payments.
Much has been made over the lack of stringency involved in the enquiry into the much maligned rental sector, however these letters, which are effectively polite but stern warnings, could placate these naysayers.
The move consists of the despatching of an estimated 40,000 letters to landlords across the UK within the next four months. These letters will essentially call on the accused to come clean and seek to sort their tax issues with HMR, or be faced with criminal prosecution or weighty fines. If no response is made in 30 days, then the landlord will suffer legal action.
Scrutiny on landlords has intensified within the last year, as HMRC took a ëgood copí approach last October, initiating a scheme which encouraged greedy landlords to come forward, admit their wrongdoings and resolve the issues amicably. Common crimes committed include botched tax returns and undeclared rental earnings.
Practically a year has passed since the commencement of that particular scheme and the results are not what the HMRC hoped. Many landlords are still skiving off their tax obligations and the government has been forced to use more radical measures to obtain the results they require.
According to various accountancy firms, HMRC have gone beyond the electoral roll and land registry and have directly communicated with estate agents & councils, demanding to see the books on letting transactions. Mark Giddens, partner at UHY Hacker Young, seemed impressed at HMRCís increased robustness on the matter.
ìIt was not until April this year that the taxman sent out notices to letting agents in which they asked for details to be provided of everyone on their books,î he said.
He continued: ìThe housing benefit payments that go direct to landlords are also being monitored more closely. This information can be obtained through the local councilís records. By investing all this time and effort they have certainty stepped up the pressure on landlords who are not declaring enough, and the letters are the next part of that.î
This heightened robustness could be coming at a time when it is sorely needed. Roughly £500m is missing from the total revenue expected to be taken in from landlords per year, and it has been said that HMRC has recruited greater numbers to join the search for UK proprietors skipping out on taxes. Tens of thousands of landlords are alleged to be shunning their capital gains tax obligations on second homes, and also fudging the numbers of their rental income so as to minimise their tax expense in that department also.
In light of this perceived disregard for HMRCí practices, greater scrutiny appeared to be needed. While HMRC have been griping about landlordsí conduct for around 3 years, the crackdown has justifiably intensified in recent times.
The full-bodied nature of HMRCís offensive against landlords is highlighted by one accountantís version of events, who claims that the taxman is investigating social media in order to catch offenders.
ìThose who let out a holiday home will not be registered to vote at that address,î she said. ìThe Revenue has increasingly been using social media to look into cases where a holiday home is, for instance, being advertised to friends to ensure that the right amount of tax is being declared on that property.î
Although HMRC reckons in excess of 1.5m people own two or more properties, a mere 500,000 people are registered with the Revenue as doing so. HMRC is seeking to reduce that particular deficit as fast as possible.
A spokesman for the Revenue declined to comment on the number of landlords who had emerged since being urged to come forward, last October, and deal with the financial aspect of matters amicably.
All rent from letting out a residential property or holiday home has to be declared for income tax purposes,î the spokesman said. ìTelling us is simple and straightforward. The message for all landlords owing tax is simple ñ it is better to come to us before we come to you.î
Although landlordsí conduct has become increasingly questionable, perhaps HMRCís increasing firmness could act as the perfect tonic to the avarice of proprietors up and down the country.