HMRC urges landlords in UK to make tax disclosures sooner rather than later
Landlords in the UK have made 13,000 disclosures through the tax man’s let property campaign was launched in 2013 to encourage those owing tax to get their affairs in order.
To date the campaign has brought in £50 million in unpaid tax and HMRC believes that most of those failing to declare rental earnings owe only a few hundreds of pounds of tax a year.
Indeed, many are thought to be small scale, amateur landlords renting out a property as a retirement nest egg, or accidental landlords letting out a former home they have been unwilling or unable to sell.
But HMRC is still urging others to come forward and says that the campaign is an opportunity for landlords who owe tax through letting out residential property in the UK or abroad to take advantage of the best possible terms.
‘If you’re a landlord and you’ve undisclosed income you must tell HMRC about any unpaid tax now. You’ll then have 90 days to calculate and pay what you owe,’ said an HMRC spokesman.
‘If you make a full and voluntary disclosure of all unpaid liabilities in these circumstances you can usually expect a lower penalty than HMRC would otherwise seek if they raised an enquiry or compliance check without the disclosure,’ the spokesman added.
There are also concerns that professional landlords are using Airbnb and other home sharing websites to avoid taxes. Sires like Airbnb was set up to allow home owners to rent out spare rooms or entire homes for short periods. Under current tax rules you can earn £7,500 a year renting out a room without paying tax.
But reports suggest that more and more professional landlords are using the service to let their properties because they can earn more money than from traditional rents and are also letting their rooms for more than 90 days a year in breach of housing regulations.
Another issue is leaseholders letting on Airbnb. Recently the Land Chamber ruled that a leasehold flat owner had breached the law by letting out her property in contravention of her lease which stated the apartment should be a ‘private residence’.
The let property scheme does not have an end date but HMRC has made it clear that landlords intending to come forward who delay risk higher penalties if they are subject to an enquiry and they have not already notified an intention to disclose.
‘Regardless of whether the errors were due to misunderstanding the rules or deliberately avoiding paying the right amount it is better to come to HMRC and admit any inaccuracies rather than wait until HMRC uncovers those errors,’ the spokesman pointed out.
He added that any amount due will depend on why a person failed to disclose their income. For example, some who has deliberately kept information from HMRC will pay a higher penalty than if they have simply made a mistake.
For example, someone who registered for Self-Assessment and completed tax returns within the appropriate time limits, but simply made a careless mistake when declaring income, will only pay for a maximum of six years no matter how many years they’re behind with their tax affairs.
However, the law allows HMRC to go back up to 20 years and in serious cases HMRC may carry out a criminal investigation. ‘This is an opportunity to stop worrying about what might happen, have certainty about what you owe and get things right for the future,’ the spokesman said.