HMRC toughens up its methods for finding Landlords who aren’t declaring their buy-to-let income
40,000 Landlords can expect to see a letter from HMRC landing on their doormats over the next three months. The aim is to close the gap between the 500,000 or so taxpayers who have registered with HMRC as owning a second property and the 1.5m that HMRC believes is the real number.
The letters are encouraging taxpayers to make a voluntary disclosure of the income they’ve received and to pay the subsequent tax that is due. The underlying message to taxpayers is, “We’re on to you. ‘Fess up, or you won’t like us when we’re nasty”
HMRC are stepping up their activities following the commencement of the Let Property Campaign in October 2013, which encouraged Landlords to get their affairs in order.
Land Registry, electoral roll and even Facebook being data-mined for information
It appears that HMRC are becoming far more savvy in their methods for detecting those with undeclared buy-to-let income. Traditional sources of information, such as the Land Registry and the electoral roll are being enhanced with a trawl of social media to find those undeclared holiday cottages. HMRC are also working much more closely with local authorities and the Department of Work and Pensions, identifying those landlords who are receiving benefit payments direct on behalf of tenants.
In the latest move, HMRC has sent out notices to letting agents in which they have asked for details to be provided of everyone on their books.
And it’s not just those who are hiding second incomes
As well as those who haven’t registered a second income from property at all, HMRC is looking very closely at the returns that have already been filed by those with properties. Among the errors HMRC are targeting are those who:
- Do not realise that only the INTEREST element of a mortgage is allowable as an expense, not the capital repayment of the mortgage,
- Are not declaring the capital gain on the sale of a buy-to-let property, as taxpayers are mistakenly thinking that there is no tax to pay on properties. (This misunderstanding comes about as there is no capital gains tax on your own home through private residence relief, provided that it is your only home or main residence, and that you’ve only used it as your home, and not for anything else).
You can make a voluntary disclosure to HMRC if you have undeclared income. HMRC’s policy on ‘errors and omissions’ means that a prompted disclosure attracts less penalties than an unprompted error that they later discover themselves.
If you have a buy-to-let property then get in touch if you’d like to discuss your options.