HMRC targeting UK buy-to-let landlords
HMRC collected £17.7m in unpaid tax from UK buy-to-let landlords in the last year
One area where HMRC is becoming increasingly concerned over the years is the amount of unpaid tax in the buy-to-let sector. New data shows HMRC collected £17.7m in unpaid tax from UK buy-to-let landlords in the last year*.
Let Property Campaign
HMRC has recouped this underpaid tax from 4,330 UK landlords in the past year via its Let Property Campaign.
The success of HMRC’s Let Property Campaign and the millions it has been able to recover suggests HMRC has become increasingly effective at identify landlords who owe tax on their buy-to-let property.
Connect AI
To detect these landlords, HMRC has a range of tools at its disposal. Its Connect AI system flags potential targets by cross-referencing data from sources such as the Land Registry, Zoopla and Rightmove.
In addition, HMRC can see whether a landlord is actively renting a property through the lists it receives from letting agents. For smaller landlords, it can also obtain this information from tenancy deposit schemes. As tenancy deposit schemes are a legal requirement it is near impossible to legally rent out a buy-to-let without HMRC knowing.
HMRC’s investigations into buy-to-let income has not only been limited to investors in the UK but it has also been focusing on landlords who live abroad. For example, 248 overseas British landlords (i.e. expats) came forward to admit underpaying tax on their UK buy-to-let property last year.
Landlords who fail to pay tax (or the correct amount of tax) to HMRC may face severe consequences. Those found guilty of offences could receive harsh financial penalties.
Landlords unaware of tax liabilities
In some cases, buy-to-let landlords may be unaware of their tax liabilities on the income which they earn on renting out their property. Landlords who are concerned about their tax affairs should act quickly and seek expert advice on how to protect themselves from investigations and potential penalties.
The increased pressure on landlords comes as in-person tax investigations return. With HMRC beginning to operate at full capacity again post-Covid, we should expect to see more investigations into buy-to-let landlords in the coming months.
*Year end 31 March 2021
Tax Investigation Service
Unfortunately this type of targeted investigation by HMRC is not uncommon. Every year thousands of enquiries are undertaken into personal and business tax affairs and many are selected completely at random. As a result, anyone can be picked for investigation, even if you have done nothing wrong. This in turn can take many months and cost thousands of pounds in professional fees to resolve.
We offer our clients a Tax Investigation Service, which acts in effect as an insurance policy against the time and costs incurred by us responding to HMRC enquiries or investigations where we deal with the tax compliance. Read our TIS Information Sheet below for further information on the service:
Read our Info SheetIf you would like any further advice, please contact a member of our team on 01903 234094.