An analysis of HMRC data has revealed in 2018-19 more than 16,000 landlords took advantage of the disclosure facility after receiving a letter from HMRC encouraging them to come forward. In total, HMRC recouped £42 million in 2018-19, double the £21 million recorded in 2017-18.
Throughout 2018 and 2019, HMRC sent the huge batch of ‘Let Property Campaign’ letters to landlords and other buy-to-let investors with undeclared rental income. This wave of letters largely targets accidental landlords with 1 or two rental properties.
The ‘prompted letter’ provides landlords a 30 day window to make contact, and then a further 3 months to regularise their tax affairs.
Those who DO NOT take this opportunity risk being investigated under Code of Practice 8/9, face much higher penalties (potentially up to 200% of any tax due) and the possibility of a criminal prosecution.
By disclosing through the let property campaign, HMRC offer favourable terms. Landlords who disclose unpaid tax face penalties of up to 20% of any tax due.
HMRC rely on a wealth of available information to identify landlords who have not declared rental income.
HMRC’s state-of-the-art analytical computer system ‘Connect‘ draws on information from a range of government and corporate sources, including HM Land Registry and the Tenancy Deposit Scheme, to create a profile of each taxpayer’s total income.
According to the data released by HMRC, the highest concentration with landlords with undeclared rental is Birmingham, with Leicester ranking second. South East London ranks as London’s top spot.
Letting agents have also been sent statutory notices demanding details of rents collected on behalf of private landlords. An initial fine of £300 applies to those agents failing to meet the initial deadline, with a potential further fine of £60 per day for ongoing failure.
Paul has 35 years of experience in tax starting at HMRC. Paul provides specialist advice to private individuals under an HMRC tax investigation or those wishing to make a voluntary disclosure.
Ian is a Chartered Accountant who has specialised in tax since 1985. He advises on tax investigations and has helped many clients resolve their tax position using HMRC disclosure facilities.