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The UK Hotspots for Tax Avoidance

London commuter towns make up all the Top Five hotspotsfor tax avoidance by buy-to-let landlords in the UK, according to analysis by UHY Hacker Young, the national accountancy group. They also make up eight of the Top Ten nationally.

Ilford had the highest number of landlords per capita in the country admitting that they have underpaid the tax on their property income in the last year (14.3 landlords admitting the underpayment of tax per 100,000 people). In second place was Slough, with 12.6 landlords admitting they had underpaid tax per 100,000, followed by Dartford (12.1), Luton (11.6) and Enfield (11.3).

These disclosures of tax avoidance by buy-to-let landlords were made under HMRC’s Let Property Campaign. The campaign proactively mailshots buy-to-let landlords suspected of avoiding tax on their rental income warning them of the consequences of tax avoidance.

The campaign has been hugely successful at encouraging millions of buy-to-let landlords to come forward and declare unpaid tax – partly to avoid a full-blown tax investigation. The total amount of additional tax collected by HMRC through the campaign amounted to £17.7 million in the last year.

HMRC’s Connect AI system detects targets for the Let Property Campaign by automatically cross-referencing data from sources including Council Tax bills, the Land Registry and even Rightmove and Zoopla listings.

Buy-to-Let is seen as a relatively accessible investment for individuals, with almost 2.7 million private landlords in the UK. However, many buy-to-let landlords are not professional investors and may fail to seek professional tax advice, potentially leading to mistakes and omissions in tax returns.

Neela Chauhan, partner at UHY Hacker Young, says: “HMRC sees rich pickings in the buy-to-let market in terms of unpaid tax. The amounts collected from landlords who have voluntarily come forward suggest they may be right in their assessment. Landlords leave themselves vulnerable to prosecution and even a prison sentence if they fail to declare the correct amount of rental income or pay CGT on the sale of buy-to-let properties. Given the consequences of laying low, proactively admitting a possible error to HMRC is unquestionably the prudent course of action.”