Landlords under the red light for underpaid and undeclared tax

There was a 51% rise in the number of landlords found to have underpaid or undeclared tax on letting income in 2018. A Freedom of Information request from Telegraph Money revealed the steep rise in residential landlords being pursued by HM Revenue and Customs (HMRC).

HMRC’s Let Property campaign saw 8,704 property landlords investigated last year and, with no signs of a let-up in the tax authority’s drive, there are fears that landlords who make honest tax filing errors are being given the same punishments as genuine tax evaders.

The Let Property Campaign has been ongoing since late 2013. Initially, it was thought the campaign would run for a minimum of 18 months, but it has since been extended until further notice. That decision is unsurprising when you consider that HMRC recouped 67% more in income tax from property landlords in 2018, to the value of £32.8 million.

HMRC’s most effective tool for identifying underpaid tax among property landlords is its Connect software. Since 2017, Connect has been working solely to find likely perpetrators of tax evasion. It does so by analysing data collated from government databases and other sources at a cost of £80 million to the Exchequer. Any property landlord found to have underpaid the tax due on their letting income can be fined up to 100% of the value of the unpaid tax. Criminal charges can also be brought to such offenders. However, property landlords who disclose genuine errors with their tax returns will be dealt with less severely with the tax authority.

HMRC will only reclaim underpaid tax going back six years for honest mistakes, with smaller fines also applied to these individuals, if any.

If you make HMRC aware of undisclosed letting income voluntarily, you will have 90 days to pay the correct amount due and any subsequent interest or penalties.

An HMRC spokesman said: “We believe our customers want to pay the right amount of tax and want to help those not paying the correct amount to put that right. “The Let Property Campaign is an opportunity for landlords who owe tax through letting out residential property to get up to date with their tax affairs in a simple, straightforward way and take advantage of the best possible terms.”

Posted by Cassey Nixon on

4th March 2019

Categories

  • Loss Buying Restrictions

    Under qualifying circumstances, Corporation Tax relief is available where your company makes a trading loss. The trading loss can be used by offsetting the loss against other gains or profits of your business in the same or previous accounting period. The loss can also be set against future qualifying trading income. However, there are restrictions […]

  • The Optional Remuneration Arrangements Defined

    The Optional Remuneration Arrangements (OpRA) legislation was introduced with effect from 6 April 2017. The legislation counters the tax and NIC advantages of benefits where an employee gives up the right to an amount of earning in return for a benefit. This includes flexible benefit packages with a cash option, cash allowances and salary sacrifice. […]