The HMRC toughens its fight against landlords who are paying less income taxes

Landlords and buy-to-let investors who have undeclared rental income have been warned to seek advice and open up with the tax collector, or they will face stiff penalties.

Shenward, a Yorkshire-based public accountancy and business advisory firm, has noted that HMRC officials are going after people who they believe may be paying fewer income taxes.

The Bradford-based company has seen an increase in inquiries from homeowners who have received warning letters from HMRC.

“HMRC is using all its resources for this task.”

Sherad Dewedi, Shenward Managing Partner, said: “We believe that HMRC has legal powers to retrieve data from leasing agents and their owner customers, and we are working to determine who is registered and who is not.”

“Those affected are required to extract the relevant financial information and report rental income, which goes back 20 years in the worst case. Interest and late payment penalties will accrue.”

“Our advice is not to wait for HMRC to call. The tax collector is likely to show some leniency degree with those who file and report unpaid taxes. The alternative is potentially high fines and possible criminal prosecution.”

Since 2013, HMRC has run its Let Property Campaign to locate homeowners, both hobbyists, and professionals, who do not report rental income on their tax returns.

The campaign covers individual property investors who owe income tax or capital gains tax on buy-to-let, multi-occupancy houses, or holiday rentals in the UK or abroad.

More severe fines can be avoided by cooperating with the HMRC.

HMRC has the power to collect information from real estate agents, mortgage lenders, and local authorities and can use this to go after those they suspect of avoiding taxes.

Tax officials can initiate a financial investigation dating back 20 years and impose substantial penalties and back interest on the tax owed.

In the most severe cases, criminal charges can be brought, leading to prison terms.

One feature of the Let Property Campaign is that if homeowners contact them first about unpaid taxes, the penalties could be less severe.

HMRC has previously estimated that there are 1.63 million private homeowners in the UK, but only around 500,000 file tax returns regularly.

In 2019, the HMRC found that 11,129 homeowners were underpaid or had not paid income tax on rental income than 8,704 in 2018.

The Revenue recovered £ 44.7 million in property taxes last year, up from £ 32.8 million the previous year.

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