Landlords that owe tax targeted by HMRC
HMRC recently announced that landlords are the latest group to be targeted for tax evasion. The current round of HMRC’s targeted campaigns against tax avoidance goes back to the Offshore Disclosure Facility (ODF) in 2007 – this targeted taxpayers with unpaid taxes linked to offshore accounts orassets. HMRC’s approach since then has revolved around offering specific targeted campaigns rather than general tax amnesties.
A new scheme aimed at landlords, who may owe tax whether through misunderstanding the rules or deliberate evasion, was launched in September 2013. The campaign will run for at least 18 months and HMRC will allow landlords to come forward voluntarily throughout the entire time period that the disclosure opportunity remains open.
The campaign is open to all residential property landlords that according to HMRC includes those that have multiple properties and single rentals as well as to specialist landlords such as student or workforce rentals and to holiday lets. HMRC estimates that up to 1.5 million landlords may be underpaying up to £500 million in tax every year.
HMRC have confirmed that taxpayers that come forward voluntarily as part of the initiative will receive better terms and lower penalties than if targeted by HMRC. From next year, landlords that have not declared all their rental income may be contacted by HMRC. They will then lose the opportunity to make a disclosure as part of the campaign. Landlords who are targeted by HMRC can face penalties of up to 100% of the tax due together with possible criminal prosecution.
Affected property owners would be advised to take professional advice before making a formal approach to HMRC under this disclosure opportunity.