The new powers, if granted, enable HMRC to force lettings agents to hand over the names and addresses of all landlords on their books. This would extend investigators’ powers to identify those who should be paying tax on property income and could bring thousands of pounds in additional tax revenues.
Accountancy firm Saffery Champness partner Tim Gregory says: “These latest proposals are the next step in what seems to be a determined effort by HMRC to stamp out illegal tax dodging, and comes on the back of similar powers to obtain financial information from certain banks about their customers.
“Properly-advised taxpayers have nothing to fear from these proposals, as they will already be on the right side of the law. Anyone who has mistakenly believed that their rental income was not taxable, or over-claimed expenses in relation to their rental business, would be best-advised to volunteer their under-declared income and pay the tax: this is likely to minimise any penalties that might become payable.”
Gregory says many landlords may find that the tax they should be paying is not nearly as much as they thought, as there are various ways to ensure that the tax bill is minimised – for example, those that are renting out a room in their own home can claim rent-a-room relief and for properties that are let out in full, mortgage interest can often reduce the taxable rent.
He says: “Any financial downturn brings with it a greater focus on making a few extra pounds wherever possible – people should avoid the temptation to do that illegally whether by tax evasion or otherwise. The last thing you want is to fear a knock on your door.”