Finance News

Just 2.3% of Landlords have made Voluntary Disclosures to HMRC under Scheme

Rose Jinks - March 18, 2019

Just 2.3% of landlords targeted by HM Revenue & Customs’ (HMRC’s) Let Property Campaign have voluntarily disclosed their taxes under the scheme, according to new data obtained by accountancy firm Saffery Champness through a Freedom of Information request. 

In its original announcement for the campaign in 2013, the Government estimated that up to 1.5m landlords had underpaid or failed to pay up to £500m in tax between 2009-10.

Those originally targeted included landlords who own more than one property, specialist investors who let to students, those with holiday lets, and landlords of Houses in Multiple Occupation (HMOs).

In the five years since the campaign began, 35,099 individuals have made voluntary disclosures to HMRC, which is just 2.3% of the landlords originally identified. Meanwhile, of the estimated £500m in underpaid taxes, the campaign has so far recovered approximately 17.1% (£85m) of that overall amount.

The Freedom of Information request also revealed that the vast majority of reasons given for disclosures was due to either a ‘failure to notify HMRC’ or ‘taken reasonable care’.

James Hender, the Head of Private Wealth at Saffery Champness, says: “From the outset, the Let Property Campaign was always looking much more widely than just traditional landlords. It also targets those who may have become accidental landlords – such as those with holiday lets or multiple occupations.

HM Revenue & Customs sign incised into the wall outside their headquarters in Whitehall, City of Westminster, London

“The tax system is becoming more complex and the burden is shifting further towards the taxpayer: this inevitably means individual mistakes and misunderstanding can happen. Looking at the data from the Freedom of Information request, of the large number of taxpayers who stated that they had either failed to notify HMRC of their original liabilities or hadn’t taken reasonable care, many would likely have been unaware that they owed anything at all.”

He continues: “According to HMRC’s estimates, there are clearly many more landlords who have additional tax to pay, but have yet to come forward.  If this is the case, then these people would be well advised to contact the taxman sooner rather than later. HMRC have been tightening the net on non-compliance and there are increasingly few opportunities for taxpayers to mitigate the risk of an investigation. This campaign is one of the few that remains open, but, with the Common Reporting Standard online and the Failure to Correct penalty system in place (both of which will affect owners of properties overseas), it is likely to remain that way for only so long.”

Lucy Brennan, a Partner at the firm, adds: “We are picking up signals from the Treasury that their long-term forecasting for tax revenues shows that some of the biggest money spinners for the last century, including tobacco, alcohol and fuel duty, are due to decline, due to changing lifestyle habits.

“There seems to be a pattern emerging of HMRC targeting other sources of tax revenues, with property being an asset that they could look to levy additional taxes on. This is already in motion, with a raft of tax changes set to hit second home owners and accidental landlords over the next year or so.”

She concludes: “You only need to look at countries such as France and the US to see that, in comparison, UK property is a relatively lightly taxed asset. The difficulty with bringing in new property taxes is that it is political dynamite and any significant reform could provoke a backlash from property owners of all stripes.”