Steven Glicher accountants like to keep our clients up to speed with the latest developments coming out of HMRC, so we thought you might be interested in this news.
HMRC has stepped up its campaign against tax avoidance, with the latest target being private landlords. Why target private landlords you might wonder? Well, HMRC’s figures would suggest that of the 1.4 million estimated landlords operating in the UK currently, only roughly 500,000 are said to have registered and declared their rental income with HMRC. HMRC is therefore targeting the remaining 900,000 landlords.
HMRC has been aware of this problem for some time. It estimates that as much as £550 million is currently underpaid by rental landlords each year.
To address this issue HMRC launched its Let Property Campaign, designed to encourage landlords to approach the tax authority and declare previously undeclared rental income. Announcing the scheme back in October, 2013, chief secretary to the treasury, Danny Alexander, said it was time for landlords to “pay up or face the consequences.”
After the initial announcement numerous letters were sent to landlords encouraging them to come clean about their rental income. However, despite this encouragement the campaign has been floundering. So HMRC has now decided to target letting agents, and will start to issue statutory notices demanding details of rent collected by letting agents on behalf of private landlords
What does this latest measure mean for private landlords and agents acting on their behalf?
Well, the threat to those who rent properties but don’t file a return is pretty clear: either you file a tax return and declare your rental income, or face a significant fine. For agents acting on behalf of private landlords in the year ending 5 April, 2013, is equally clear: comply or face the consequences. Once HMRC has issued statutory notices, letting agents will have 60 days to return the information to the tax authority. Failure to comply with the notice will result in an initial £300 penalty and up to £60 a day for a continuing failure. Letting agents have also been informed that they should also ensure they provide wholly accurate information as HMRC can charge a penalty of up to £3,000 for any careless or deliberately inaccurate information submitted.
So what’s the latest position for landlords and letting agents? What do they need to do to comply with HMRC’s guidelines? Well, when anyone starts renting out property, they must tell HMRC and they may have to pay tax. They are required to report income from property rental if they receive:
- £2,500 or more from property after deducting allowable expenses.
- £10,000 or more from property before deducting allowable expenses.
If a landlord’s property income does not meet either of these thresholds, they must still notify HMRC and possibly the Tax Credits Office, to advise them of their new income. If landlords make a loss on renting, they should still ideally register for a voluntary tax return; in that way they can document their losses and carry them forward to offset against future profits.
Who can use HMRC’s Let Property Campaign?
Anyone can report previously undeclared rental income if they’re an individual landlord renting out residential property. By ‘anyone’, the regulations mean anyone:
- Renting out a single property.
- Renting out multiple properties.
- A specialist landlord, e.g. student or workforce rentals.
- Renting out a room in their main home for more than £4,250 a year or £2,125 a year if letting the property jointly, i.e. above the ‘Rent a Room Scheme’ threshold.
- Living abroad and renting out a property in the UK.
- Living in the UK and renting a property abroad.
- Renting out a holiday home even if you they it themselves.
However, companies or trusts renting out residential property or renting out commercial property are not able to use this scheme to declare undisclosed income.
If you’re unsure whether the Let Property Campaign applies to you, then you might want to take a look at HMRC’s useful questionnaire to inform your judgement. Alternatively, if you would like expert help dealing with HMRC, then you should speak to Steven Glicher accountants. We can deal with all matters, from registration to calculation of your income and completion of your returns. We can also liaise with HMRC on your behalf and deal with any necessary correspondence. We can even review your affairs and ensure that you are trading using the right structure, whilst claiming all the expenses you’re entitled to.
For further information call Steven Glicher accountants on 0161 485 8007 or email info@.