HMRC crackdown on landlords: Letting Agents caught in the cross-fire

As HMRC continues its effort to build a ‘hit list’ of landlords and their properties to compare against tax returns, Letting Agents across the UK are being caught in the cross-fire.

What is happening?

Statutory Notices are being issued by HMRC to Letting Agents all over the UK, giving them 60 days from the date of the Notice to submit client lists with names and addresses of landlords (both UK resident and non-resident) for whom rents have been collected, the amount of the total gross rent collected from the tenant on behalf of the landlord for the tax year ended 5 April 2013 and the address of the let property to which the rents relate.

Why?

This latest move is part of a wider clampdown on tax evasion.Indeed, this follows on from the ‘Let Property Campaign’ which commenced in December 2013. This is a scheme aimed at encouraging landlords to make voluntary disclosures of previously undeclared rental income, whether undeclared due to misunderstanding the rules or deliberate evasion.

Obligations of letting agents

Letting Agents have no choice but to comply.All are under a legal obligation to provide the requisite inrmation within the 60 day timeframe once a Notice has been received.Failure to comply attracts an initial penalty of £300 plus up to £60 per day for a continuing failure.In addition, HMRC are at liberty to impose a penalty of up to £3000 in situations where the Letting Agent carelessly or deliberately provides inaccurate information. HMRC places the responsibility and cost of preparing this information solely on the Letting Agent.It is worth noting that such costs are not covered by Fee Protection Insurance. As this is a legal obligation, Letting Agents can rest assured that disclosing such information does not breach the Data Protection Act 1998. While Letting Agents are under no obligation to inform landlords that they have provided information about them to HMRC, they are free to do so should they so wish.In this situation, it would be prudent to make it clear that all Letting Agents nationwide have had to provide this information and that they are required to do so by law.

What will HMRC do with the information?

HMRC will use the information to check that the named landlords have declared their rental income correctly on their tax returns.No doubt they will also cross-reference using information from other sources, such as the Land Registry (by cross-checking council housing benefit payments against Land Registry title records) and Electoral Rolls to identify houses in multiple occupation.

How we can help letting agents

Stanes Rand Chartered Accountants, based in central Cambridge, specialise in the property sector and can undertake, through the six monthly NALS and ARLA audit, specific work to review your systems so that you can identify non-resident landlords at an early stage. We can also assist in any HMRC enquiry relating to this area in order to mitigate any penalties, or if the Non-Resident Landlord Scheme has not been operated correctly, assist in making a voluntary disclosure to HMRC.

How we can help landlords

Stanes Rand specialise in the property sector and have a number of private clients with extensive property portfolios.We are therefore happy not only to advise both current and prospective landlords on any area of compliance, but also to identify various tax planning opportunities which would be of benefit to them.

As featured in Cambridge News Wealth Management Supplement, 22 April 2014