Is Time Running Out for Non-Compliant Landlords?

There is no doubt that, following recent changes in the law, Landlords are very much on the radar of HM Revenue and Customs with the abolition of wear and tear allowance and the restriction of mortgage interest relief.

However, HM Revenue and Customs are well aware that there are many Landlords out there not declaring their rental income at all. In certain areas of the country, it is estimated that as many as one third of Landlords are not declaring their income.

HM Revenue and Customs are now actively seeking these rogue Landlords by cross referencing various databases, including the Land Registry.  If an individual owns two or more properties and is not paying tax, they could soon be contacted by HM Revenue and Customs seeking an explanation.

In such cases, HM Revenue and Customs have the powers to look back 20 years, calculate the lost tax and impose penalties of up to 100% of the tax calculated together with late payment interest. Non-compliant Landlords also run the risk of being subject to criminal investigations.

HM Revenue and Customs do, however, offer the opportunity for non-compliant Landlords to voluntarily bring their affairs up to date before they are caught, with the resulting settlement being on more favourable terms.

In August 2013 HM Revenue and Customs launched the ‘Let Property Campaign’ and this disclosure facility is still open today. The campaign is open to all residential Landlords from those with multiple properties to those with single rentals including student and holiday lets.

Should a Landlord contact HM Revenue and Customs before being identified as non-compliant, there is an opportunity for that Landlord to bring his/her affairs up to date and benefit from lower penalties, typically between 0% to 20%, depending on the specific circumstances. HM Revenue and Customs are also more likely to be open to the idea of offering the Landlord additional time to settle any outstanding liabilities.

This campaign has now run for four years and, although there is officially no end date for the campaign, HM Revenue and Customs could close this without notice. Therefore, if you (or someone you know) are not declaring rental income, prompt action would be advised.

At Wright Vigar we have a team of property specialists who have experience in helping Landlords bring their tax affairs up to date while minimising any exposure to tax or penalties. Should you wish to discuss the Let Property Campaign or any other matters regarding the taxation of property, please contact Nathan Bowles or a member of our specialist tax team on 0845 880 5678 or email nathan.bowles@wrightvigar.co.uk.