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HMRC to seek out tax dodging landlords

The Government has put forward proposals that may allow HM Revenue & Customs to demand the details of all landlords on letting agents’ books in an attempt to curb tax evasion.

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.”

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Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. Mark Lee, Chairman of Tax Advice Network 15th July 2009 at 3:43 pm

    It’s a consultation document
    Sorry guys but your opening statement isn’t really correct.

    All that has happened so far is that HMRC have published a consultation document. This MAY lead to the proposals mentioned and such a change could come into effect from 6 April 2010.

    In the meantime there is plenty of time for anyone affected to regularise their affairs. The new penalties regime that came into force last April means that it can be advantageous to voluntarily admit if tax has not been fully paid in the past. Certainly this is better done now before HMRC obtain the information elsewhere and start asking questions about it. The penalties payable in such cases will be much higher.

    Where the sums involved are significant it can make sense to take advice from an experienced tax specialist. This will often pay for itself through their ability to negotiate lower penalties than would otherwise be payable. They may also be able to help you prove that less of the rental income is taxable than you had feared.

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