The HMRC has announced a crackdown on all landlords who are underreporting or simply not reporting their rental income and those who do not come forward may face criminal charges. The HMRC estimates that unpaid landlord taxes total £500 million and HMRC representatives warn landlords that it will be much cheaper and easier to come forward before they are targeted for nonpayment of tax. There will be an 18-month amnesty period to allow landlords to come forward, but after that all bets are off as the taxmen start to make their rounds. For more on this continue reading the following article from Property Wire.
Private residential landlords are being advised to put their house in order as the UK’s taxman has announced a crackdown on unpaid taxes.
It is estimated that around £500 million is owed by landlords in unpaid tax and HMRC has launched a campaign to target buy to let, student and holiday let landlords who it believes are underpaying or deliberately not declaring rental income.
Residential landlords can expect a knock on the door during the Let Property Campaign which builds on previous initiatives aimed at plumbers and electricians, building contractors, takeaway restaurants, motor traders and many other sectors that have collectively seen HMRC collect over £800 million in unpaid tax.
The so called ‘amnesty’ will last 18 months and failure to come forward could result in criminal proceedings. ‘All rent from letting out a residential property or holiday home has to be declared for income tax purposes,’ said Marian Wilson, head of HMRC Campaigns.
‘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,’ she explained.
‘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,’ she added.
Stephen Barratt, private client tax director at accountants James Cowper said landlords should not be wary and take it as an opportunity to put their tax affairs in order.
‘This campaign is designed to give residential landlords the opportunity to come forward and disclose any unpaid or under paid tax. This is a window of opportunity to get tax affairs in order before HMRC comes knocking,’ he explained.
He pointed out that in targeting residential landlords, HMRC recognizes that there will be instances where individuals have either deliberately not declared rental income on let properties or made an honest mistake. This distinction is important when looking at what penalty might be imposed.
‘HMRC is using increasingly sophisticated software to identify those who are not paying sufficient tax and the chances of going undetected are therefore diminishing. This campaign offers landlords the opportunity to come forward voluntarily and pay any unpaid tax, interest and penalties at a preferential rate,’ said Barratt.
‘Landlords who continue to close the curtains and hide behind the sofa can expect HMRC to find them and enforce much stiffer penalties or even criminal prosecution,’ he added.
The advice from the firm for residential landlords who believe that they may have an outstanding tax liability is not to approach HMRC directly without first speaking with an accountant or tax adviser as HMRC is an increasingly tough negotiator and without detailed knowledge of the tax system larger tax bills and penalties than necessary might be charged.
It also says landlords should not ignore this clampdown as it is possible that HMRC is already aware of landlords’ financial details. Also, if HMRC make the first move because no voluntary disclosure has been made, penalties can be expected to be more severe.
This article was republished with permisison from Property Wire.