{"id":11760,"date":"2017-09-07T13:06:44","date_gmt":"2017-09-07T12:06:44","guid":{"rendered":"https:\/\/www.benhams.com\/news\/?p=11760"},"modified":"2019-02-11T10:59:54","modified_gmt":"2019-02-11T10:59:54","slug":"hmrc-closing-in","status":"publish","type":"post","link":"https:\/\/www.benhams.com\/news\/landlords\/hmrc-closing-in\/","title":{"rendered":"The taxman cometh"},"content":{"rendered":"

\u2018London landlords are avoiding \u00a3200m in tax by not declaring income\u2019 ran some recent <\/span>headlines<\/span><\/a> after Newham Council said its landlord licensing scheme had found 13,000 landlords had not registered for self assessment. While HMRC disputes the claim, the news story raises an interesting point about tax. This month, I’m<\/span>\u00a0discussing how the HMRC net is closing in on undeclared rental income. <\/span><\/p>\n

It\u2019s a dangerous thing to do at the best of times, as HMRC will charge interest on the tax owed, the tax itself plus a penalty; it may choose to prosecute and that could lead to a prison sentence. Unscrupulous landlords might think they can fly under the radar but HMRC has an extensive data gathering network at its fingertips. As\u00a0<\/span>Tax Aid<\/span> points out: \u201cHMRC actively searches for non-registered businesses and undeclared or under-declared income. Information can come from a variety of sources: online search, door-to-door enquiries, reports from members of the public or from relatives, information from other government departments, investigations into other businesses… HMRC uses very sophisticated software called Connect. This analyses large volumes of information, detecting patterns, connections and inconsistencies to flag up possible tax evasion. HMRC also has extensive information gathering powers to access information on such things as debit and credit card sales and details of online selling.\u201d<\/span><\/p>\n

\"HMRC\"So if this was the system before the changes to mortgage lending, imagine that the strict affordability tests will have increased HMRC\u2019s data gathering exponentially. Any portfolio landlord (four or more properties) will now\u00a0have to provide details of the entire portfolio, personal cash flow and tax returns. \u00a0Any lenders or agents who spot inaccuracies will have a duty to report this to the HMRC.<\/span><\/p>\n

For non-portfolio landlords and those have no intention of becoming so, the strict mortgage lending assessments are possibly not a concern. However, the fines and additional costs of undeclared income should still be a worry \u2013 <\/span>one expert<\/span> warns the fine could be up to 100% of the unpaid tax – 200% of the unpaid tax if the funds are held in an offshore account – and HMRC can publically name and shame the landlord (if the debt is more than \u00a325,000).<\/span><\/p>\n

\"\"For some landlords, undeclared income is a genuine error and<\/span> while it is mandatory for agents to declare a landlord\u2019s rental income to HMRC on request, some agents don\u2019t make keeping track of things easy for their landlords either. <\/span>That\u2019s why we offer a tax return service for overseas landlords with no other UK income and\u00a0who may not be familiar with UK tax laws. In fact, 35% of our overseas landlords<\/a> use this service, which\u00a0<\/span>ranges from simply sending reminders to completing returns for them; we want to help our clients to avoid any fines and damage to their reputations. After all, tax avoidance is a crime which casts a bad light on the industry as a whole, especially \u00a0unfair on landlords who correctly declare their rental income. \u00a0\u00a0<\/span><\/p>\n

While agents can help landlords to stay on the right side of the law, those that use online services rather than a traditional <\/span>lettings agency<\/span><\/a> may not have such luck. They could find themselves facing an unpleasant bill if the databases are requested by HMRC. Whether it is in error or deliberate, undeclared income and tax avoidance carry heavy penalties so it pays to get your house in order.<\/span><\/p>\n

If you would like to take advantage of our tax return service then speak to one of our team on 020 7319 9782 or contact us <\/span>here<\/span>. You can also get an up to date rental valuation online using our <\/span>instant calculator<\/span>.<\/span><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

\u2018London landlords are avoiding \u00a3200m in tax by not declaring income\u2019 ran some recent headlines after Newham Council said its landlord licensing scheme had found 13,000 landlords had not registered for self assessment. While HMRC disputes the claim, the news story raises an interesting point about tax. This month, I’m\u00a0discussing how the HMRC net is … <\/p>\n

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