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A large number of landlords have received letters from HM Revenue & Customs (HMRC) warning them that HMRC knows they have rental properties. This comes after databases held by tenant deposit agencies were handed over to the taxman.
HMRC Information Gathering Tactics
HMRC relies on a number of avenues for its information, including word of mouth from informants. It has a sophisticated data collection system called CONNECT, which does exactly what you might expect give the name.
The CONNECT system ‘connects’ the dots using data collected from letting agents, buy to let mortgage lenders, and housing benefit records. However, HMRC now has another way to identify landlords who may not be declaring their property income: tenant deposit schemes.
Landlords are required by law to place tenants’ deposits in deposit protection schemes. So far so good, but what a lot of landlords might not consider is that this information is being passed to HMRC.
Let Property Scheme Amnesty
HMRC is currently very busy crosschecking names against information gathered from self-assessment forms. Landlords who are suspected to have undeclared income are being sent letters through the Let Property Scheme, a scheme was set up to provide an amnesty for landlords to declare any taxable property income in return for reduced penalties.
Landlords who have received a letter from HMRC now have the opportunity to sort out their tax affairs before HMRC take a tough stance. If you are one of these landlords, you are advised to take advice from a tax specialist as soon as possible.
