New ‘Let Property Campaign’

Written by Shakeel Butt on 7 November 2013

Over the past few years HM Revenue and Customs (HMRC) have introduced several campaigns targeting different risk areas and trades, in an attempt to help and encourage those involved, to come forward and bring their tax affairs up to date. The campaigns have covered a whole range of risk areas and trades, such as, plumbers, electricians, VAT compliance, property sales and the offshore disclosure facility.

The campaigns offer the opportunity for individuals to get their tax affairs in order on the best possible terms, i.e. reduced penalties, and also with leniency from HMRC, which would not be available otherwise.

HMRC then use information gathered before and during the campaign, to follow up those who chose not to set their tax records straight, by means of investigations and prosecutions.

Since 2007, HMRC’s campaigns have collected over £552million in tax from individuals voluntarily stepping forward and over £224million from successful follow up work. Seven people have been convicted, with custodial sentences of up to two years, and there are numerous criminal investigations underway too. Those convicted have had to pay over £500,000 between them.

Landlords who do not declare or comply with their tax obligations are not forgotten. Earlier this year, the ‘Property Sales Campaign’ was launched in addition to the various HMRC taskforces already working to identify ‘non-compliant’ landlords.

HMRC clearly view landlords as a very high risk area as they are set to launch another new campaign. The ‘Let Property Campaign’ will target those who let residential accommodation, either within their own homes, or in separate properties. So non-compliant landlords, beware…

Currently there seems to be a great deal of focus on landlords, as over the weekend (2nd November), The Daily Telegraph reported that banks and mortgage lenders are cracking down on thousands of so called ‘accidental landlords’ who let out their homes without notifying their bank/lenders.

Despite strong signs of recovery in the housing market, thousands of people remain stuck in negative equity and are unable or unwilling to sell their property. Many are labelled as ‘accidental landlords’, who are estimated by some to make up 30% of the landlord market. Lenders have tended to ensure that they capitalise on this by increasing interest rates (typically a rise of between 1% and 3% coupled with an admin fee) or requiring the borrowers to switch from a residential loan to the more costly buy-to-let loan, significantly increasing monthly repayments.

Lenders are suspicious that a vast number of landlords are keeping quiet about their arrangements in order to avoid the higher rate of interest. Whilst many choose to stay quiet, it should be noted that borrowers have a contractual obligation to inform their lender if they want to let a property. Methods such as trawling through the electoral register, social media websites and online letting agencies, are used by lenders, in pursuance of those who conceal their landlord status, to look for signs that a property has been put up for rent.

Of those ‘accidental landlords’ who choose not to inform their lenders, I suspect a significant number are also not compliant with their tax obligations.

If you would like any help or assistance with matters relating to the above, please do not hesitate to contact me on 020 8545 7624 or email me at Shakeel.butt@wsm.co.uk.

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Shakeel Butt
Private and Corporate Client Director