A tax specialist has expressed concern that HMRC, armed with information provided by local authorities, could now be hounding private landlords in an attempt to track down tax dodgers.
Mike Down, of accountancy firm Baker Tilly, said he had seen a copy of a ‘stencilled’ letter sent to one landlord client. The landlord in question had been perfectly compliant about declaring his rental income. The information utilised by HMRC had been supplied by a local council in the west country.
Down said the letter was asking for information on addresses of properties, periods let, and the amounts of monthly or weekly rent involved, as well as asking a string of further questions such as how each property was acquired (e.g. purchased, inherited or gifted), and the number of tenants in each property.
He said: “Clearly it’s good to see HMRC cracking down on tax cheats, but we do have real concerns over what appears to be the non-risk-based approach of this campaign.
“What’s even more shocking is that telephone staff at HMRC are openly admitting that the probing letters are being issued without the department having first checked whether the landlord is in fact fully declaring the rents on their annual tax returns.
“Quite aside from the fact that questions asked of taxpayers who have completed returns under Self-Assessment must be made under the formal and time-sensitive enquiry framework, it seems that HMRC staff are unnecessarily wasting the time of law-abiding taxpayers, as well as their own valuable people resource.
“Surely it’s time HMRC were more careful with their precious resources and invested time in carefully checking third-party information before sending what might be viewed as scarily aggressive letters to those who are fully tax compliant?”
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Comments
AL, Robert designed/influenced the software systems that most agents use to run their PM accounts including Section 19 and CNR reports for HMRC. He explained a complicated Section 19 issue for us which suggests to me he knows what he is on about.
I have seen folk challenge him on several of these subjects only to find out he was right.
For what it is worth I don’t think I would be brave enough to advise a client to ignore requests for information from HMRC in the hope of avoiding a penalty charge!
I'm sure AL is right.
People have an absolute duty to pay the tax they owe.
"I'm earning an income but the tax man didn't specifically contact me and ask me to declare it" sounds like a pretty feeble defence to me.
Please read the article properly. Firstly it states that the person(s) in question had declared through self assessment and the HMRC should check is this is the case before nsending out letters. This is true as chasing people who have declared tax is wasting HMRC resources. Therefore the article is quite right in that they are using third party information without checking it and then compounding this by not checking their own records either.
It is similar to an agent sent a letter to one of their vendors saying 'Please can I have a chance to sell your house' and equally unimpressive.
As for your statement re you need to be asked you are mistaken. It is the responsibility of a taxpayer to notify the HMRC of any change of circumstances, IF they did not come back and request you to self assess then you may have a defence in this however I would advise against replying on it as you are likely to face fines and or prosecution. Check the HMRC webpage for penalties and you will see even filing in error withour intent can attract penalties.
Quite simply if you recive any monies you will, most likely, be due to pay tax and saying 'I didn't know' will not get you very far.
SA105 Land and Property only need be completed if there is request from HMRC.
Many landlords (accidental or otherwise) whilst aware of their responsibility to pay Tax on property income have never been requested to pay Tax so don't.
I am quite surprised that Mr Down can slam HMRC for any attempt or effort they commit to reducing the amount of undeclared income.
We were visited some years ago by a representative of HMRC to check that we were compliant with the Non Resident Landlords Tax legislation. However, as I pointed out to the tax man, as we had registered with HMRC, it was likely that we would know what was required of us and should he not be checking those letting agents that had not registered.
I said all that all he had to do was get a copy of the local newspaper in each area and compare the names of those letting & estate agentswith HRMC records and go after the ones that had not registered with them instead of bothering us!
I also mentioned that there were numerous landlords who lived abroad who let their properties directly through the USAF base housing offices - he said he was unaware of this.
Hopefully he took this on board as we haven't seen him since.