HMRC Knocks on Doors of Private Landlords

Wednesday, June 06, 2012

On 31 May 2012, HMRC announced that private landlords can expect a knock on the door in the coming weeks as it launches a special task force to investigate and recover up to £17m in unpaid taxes.

Whilst specific details on the scope of the task force are yet to be announced, it is likely to focus on landlords providing temporary accommodation and those with houses in multiple occupancy. The task force is initially focusing on private landlords in East Anglia, London, Leeds, York, Leicester, Nottingham, Lincoln, Durham and Sunderland, but could, warns accountants and business advisers James Cowper, be easily extended to cover the whole country.

 Stephen Barratt, Private Client Director at accountants and business advisers James Cowper, said: "Landlords can reasonably expect HMRC to gather information from across Government departments, and many other sources  including press and internet advertisements, universities and colleges. HMRC is also using increasingly sophisticated techniques to identify those who are not paying sufficient tax and the chances of going undetected are rapidly vanishing."

And it is not just unpaid income tax that HMRC will be looking for. Many landlords providing temporary accommodation - perhaps to seasonal agricultural labourers, students or even homeless people - may find that a sizeable VAT liability is incurred.

Ruth Corkin, Head of VAT Services at James Cowper, adds: "Many landlords may not realise that VAT is chargeable on temporary accommodation as HMRC treats it in the same way as hotel or guest house accommodation. Landlords may not be registered for VAT when they should be and so could face a back-dated VAT claim." 

Ruth adds: "This announcement from HMRC will undoubtedly trigger a response from people who know or suspect that they have not been paying the correct amounts of tax; this is the very reason for the announcement. I would always recommend that individuals who believe they owe tax seek advice from their accountant or tax adviser and look to take advantage of opportunities to bring their tax affairs up to date." 

James Cowper offers this advice to those individuals who believe that they may have an outstanding tax liability:

• Do not approach HMRC directly without first speaking with your accountant or tax adviser. HMRC are increasingly tough negotiators and, without detailed knowledge of the tax system, a larger tax bill and penalty than necessary could be charged;
• Do not ignore this clampdown. It is possible that HMRC is already aware of your financial details and so, having publicly drawn attention to this area, it is likely that future penalties might be higher.

HMRC has so far launched 12 special task forces targeting doctors and dentists, building trades and online traders amongst others, and intends to launch a further 30 over the coming year.