Private North East landlords are being advised to review their rental income declarations after HMRC revealed it had collected over £50m in additional tax through a campaign set up to maximise its income from the residential property sector.The Let Property campaign was designed to encourage residential property landlords to come forward and voluntarily disclose any undeclared rental income before the taxman came looking for it.
And HMRC has now collected previously undeclared income from more than 10,000 landlords across the UK since the campaign’s launch in autumn 2013, making it one of the organisation’s most successful voluntary disclosure drives ever.
With HMRC now redoubling its efforts to target more residential landlords who aren’t fully declaring their taxable income, Christopher Moir, personal tax manager at Gosforth-based RMT Accountants & Business Advisors, is advising anyone who thinks they might come under the spotlight to take proactive steps to ensure their tax affairs are entirely up to date and complete.
And with the resurgence of the North East buy-to-let market over the last couple of years, Moir believes new landlords who have recently entered the market with just one or two properties should be making especially sure that they stay on the right side of the taxman from the off.
He says: “This campaign was launched on HMRC’s belief that they had a lot to gain from targeting the rental property market, and there will doubtless be hundreds of North East landlords amongst the 10,000 and more from whom tax on previously undeclared income has been extracted in the last two years.
“North East landlords must make sure all their rental records are fully up-to-date, and should be carefully considering whether they need to make use of the continuing campaign amnesty in order to properly organise their tax situations.”
The Let Property campaign covers a wide range of different types of residential landlords, from those letting properties to students and other large groups to anyone who lets out holiday accommodation or properties for multiple occupation.
Anyone making a voluntary disclosure through the campaign is likely to receive a lower penalty compared to those whom HMRC approaches directly.
HMRC and The Treasury had previously estimated that around 1.5m landlords across the UK might have underpaid or failed to pay what they owed on their income, a shortfall which amounts to around £500m a year.
Christopher Moir continues: “With the North East buy-to-let market picking up significantly in the last couple of years as economic conditions have improved, there will be a lot of inexperienced landlords around the region who might not necessarily have a full understanding of how their rental income might impact on their tax position.
“As ever with the taxman, ignorance of your obligation is no excuse for failing to fulfil them, and while mistakes and misunderstandings can clearly happen to anyone, these new entrants to the market will be just as liable for investigation as those who have been there for a long time.
“All rent received from letting out properties needs to be declared, regardless of whether you’re making a profit on it, but the taxman can only go on the information they receive from private landlords, meaning there is scope for incomplete reporting.
“HMRC can and does impose substantial penalties on those that it believes are not telling it the whole story, and their primary message of ‘it’ll be cheaper to come to us before we come to you’ very much holds true, especially as HMRC investigations can cost a great deal in terms of time, money and inconvenience.
“We would very strongly advise any residential landlords who think they might be vulnerable to this sort of investigation into their financial affairs to quickly take proactive steps to ensure everything is as it should be.”
RMT provides the full range of financial and business advisory services through its Specialist Tax, Recovery & Insolvency, Corporate Finance and Medical divisions. For more information, please visitwww.r-m-t.co.uk