HMRC TARGETS NON-RESIDENT LANDLORDS WITH UNDECLARED RENTAL INCOME

Throughout 2018 and 2019, HMRC sent the large batch of ‘Let Property Campaign’ letters to landlords and other Buy-to-Let investors with undeclared rental income. This wave of letters largely targeted Non-Resident Landlords (NRLs).

The Let Property Campaign gives landlords with undeclared rental income the opportunity to bring their tax affairs up to date with the best possible terms.

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 100% of any tax due) and the possibility of a criminal prosecution if serious tax fraud was committed.

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 individuals’ total income.

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.

The UK has the first right of taxation on rents arising from UK property. Landlords whose usual place of abode is outside of the UK for more than six months must be registered with and pay tax on rental profits HMRC under the NRL scheme. Whilst under the scheme, letting agents usually deduct tax from the landlord’s UK rental income, landlords should still file a non-resident landlord tax return as tax deducted by the agent is unlikely to be equal to the landlords’ tax liability.