» Read the complete article

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

These proposed powers would allow HMRC to force lettings agents to hand over the names and addresses of all landlords that they take care of. This would means the HMRC could identify those who are paying tax on property income, and more importantly those who are not.

Tim Gregory, partner at accountancy firm Saffery Champness 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.”

There is some good news though – Gregory says many landlords may find that the tax they should be paying is not nearly as much as they thought, as landlords have many tax loopholes they can exploit – 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.”

Peter Bolton King, chief executive of the Association of Residential Letting Agents, says: “There are vast numbers of landlords that use an agent to find a tenant in a ‘let-only’ arrangement. While this push by HMRC has the potential to catch a lot more landlords out, it will also create a lot more work for agents in terms of their record-keeping.”

SOURCE: ARLA, HMRC, Saffery Champness, 15/07/09

To keep up with the latest News and comment on the UK buy to let market visit the Buy to Let Mortgage Blog