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Hmrc Overwhelmed By Btl Dragnet

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HMRC hopes to raise £550 million in unpaid taxes from an estimated 1.5 million BTLers in its "Let Property" campaign started in 2013 however so far it has only raised t £7.8 million because it is unable to process the quantity of information it has received. Files for Landlords owning up to unpaid taxes are currently taking 6 months to process. HMRC have sourced the names and addresses of a huge number of landlords from all manner of sources, such as land registry and letting agents. The majority of tax cheating landlords are employees with one rental property.

These are the top excuses for BTLers not paying tax:

  • Incorrectly believing that your letting agent pays the tax on your behalf.
  • Not realising only mortgage interest is an allowable cost against rental income and that the capital element should be omitted.
  • Incorrectly assuming that because tax is paid on your employment income then no further tax needs to be paid on your rental profits.

linky: http://blog.northwooduk.com/2014/12/ready-or-not-here-it-comes-hmrc-vs-landlords/?cmsys=1342882381&cmref=82072771363176850607

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These are the top excuses for BTLers not paying tax:

  • Incorrectly believing that your letting agent pays the tax on your behalf.
  • Not realising only mortgage interest is an allowable cost against rental income and that the capital element should be omitted.
  • Incorrectly assuming that because tax is paid on your employment income then no further tax needs to be paid on your rental profits.

Jesus wept.

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Files for Landlords owning up to unpaid taxes are currently taking 6 months to process.

Better late than never. Potentially growth industry. Maybe worth employing some more landlord inspectors. Create employment, increase tax receipts. Win-win.

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HMRC could do with some innovation here.

They should do something that would enable the rise of a PPI misselling-like compensation chasing industry.

Pay private companies to find and chase landlords not paying tax. Give them a cut if need be.

Give their own staff a bonus of 1% of evaded taxes. They'd be working night and day.

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HMRC could do with some innovation here.

They should do something that would enable the rise of a PPI misselling-like compensation chasing industry.

Pay private companies to find and chase landlords not paying tax. Give them a cut if need be.

Pay?

Ive said before, you should get counter interest groups to volunteer to do it. I. E. Plenty of HPC members would willingly investigate BTL landlords for free in their spare time.

(hopefully without the East German secret police consequences)

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course, they spent 25 man years preparing for this onlsaught...but then didnt give the manpower to tackle the problem, which as far as I can see, takes a calculator, a quick letter saying you owe back tax to the sum of £x, and an entry on the clients file.

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Give their own staff a bonus of 1% of evaded taxes. They'd be working night and day.

Across all sectors of tax.

Do you think they'd go after the big ones first?

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22 million tax payers to check, and they cant handle this lot, who already submit tax returns anyway.

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Spot on. Makes far too much sense though so will never be implemented.

hope not...we dont need financially incentivised witch hunts on every person in the land.

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As simple as a letter through the door with an automatic calculation based on average rental for the property in the area and PAYE taxes paid. Just let them prove voids and repairs themselves to contest the estimate. As for those who actually earned more, they'll be happy to pay the amount asked and this will not stop HMRC for demanding more once the proper IT is in place. and new facts are discovered.

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hope not...we dont need financially incentivised witch hunts on every person in the land.

If you worked for HMRC and there was a 1% zinger bonus, wouldn't you form an A team to go after the really big guys. And ban letting people off paying taxes if they take HMRC to dinner.

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Pay?

Ive said before, you should get counter interest groups to volunteer to do it. I. E. Plenty of HPC members would willingly investigate BTL landlords for free in their spare time.

(hopefully without the East German secret police consequences)

sign me up , lets set up a consortium where all hpc members take a slice of the profits and go for the juggular , gordon gekko style

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Thats a little over £300 per slumlord.

If average rent is £800 per house/flat, it means they're after 3%.

There is so much more remaining for the Labour coalition to tax after the election.

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All landlords should be registered to ensure minimum standards and prevent exploitation and criminal activity. Significant fines (charged ultimately against the value of the property if necessary) for breaching the rules. Easily enforced by ensuring that each new tenancy agreement includes the landlord's registration details which also have to be used when protecting the tenant's deposit. This would provide HMRC with a national list of landlords to cross-check with tax declarations. So simple. Clearly in the interests of good tenants and professional landlords. Banks could underwrite some of the costs because they could pay to use the database to ensure that owner-occupied mortgages were not being used for BTL properties (i.e. mortgage fraud).

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All landlords should be registered to ensure minimum standards and prevent exploitation and criminal activity. Significant fines (charged ultimately against the value of the property if necessary) for breaching the rules. Easily enforced by ensuring that each new tenancy agreement includes the landlord's registration details which also have to be used when protecting the tenant's deposit. This would provide HMRC with a national list of landlords to cross-check with tax declarations. So simple. Clearly in the interests of good tenants and professional landlords. Banks could underwrite some of the costs because they could pay to use the database to ensure that owner-occupied mortgages were not being used for BTL properties (i.e. mortgage fraud).

Sounds like a great basis for an HPC campaign. Might be difficult finding a sympathetic MP to support it though.

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Sounds like a great basis for an HPC campaign. Might be difficult finding a sympathetic MP to support it though.

Oh, and such a system would also prevent those relatively rare instances where people claim to be the legal owner and fraudulently let out a property to unwitting tenants before doing a runner with their deposits and first month's rent. I say relatively rare, but I do know people that this has happened to. The fact that crooks can masquerade as the legal owner of a property highlights just how hopelessly unregulated this whole sphere is. No wonder HMRC don't get paid the tax they should.

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All landlords should be registered to ensure minimum standards and prevent exploitation and criminal activity. Significant fines (charged ultimately against the value of the property if necessary) for breaching the rules. Easily enforced by ensuring that each new tenancy agreement includes the landlord's registration details which also have to be used when protecting the tenant's deposit. This would provide HMRC with a national list of landlords to cross-check with tax declarations. So simple. Clearly in the interests of good tenants and professional landlords. Banks could underwrite some of the costs because they could pay to use the database to ensure that owner-occupied mortgages were not being used for BTL properties (i.e. mortgage fraud).

Council's don't manage their own properties very well, so why do you think giving them private LL to chase would be any better?

EH needs more powers to be able to prevent LL being crap. But that's useless without tenants having the gumption to not put up with crap properties.

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Sounds like a great basis for an HPC campaign. Might be difficult finding a sympathetic MP to support it though.

There might be one somewhere in the Commons who has only got one or two BTL's....

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No. Rents are not set by costs. Landlords charge what rent they can get (within parameters of ease etc.). This is well known.

But you are correct, yields may have to rise. Marginal concerns will be released back to the market but that doesn't solve anything at all because demand will fall by the same amount as supply. The only way yields could rise to meet the additional costs for marginal producers is for property prices to fall....which again does not help current landlords, only new ones.

Most landlords above the marginal concern threshhold will merely absorb any additional costs.

Makes sense - for tax it's the profit that matters and a lot will be making precious little profit anyway.

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Pay?

Ive said before, you should get counter interest groups to volunteer to do it. I. E. Plenty of HPC members would willingly investigate BTL landlords for free in their spare time.

(hopefully without the East German secret police consequences)

naah, more effective to let the landlords police themselves.

ie..know a landlord not paying tax???

dob them in and get 10% of their portfolio for a secured conviction.

greed works every time.

Edited by oracle

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Does this mean a lot of rents are going to need to go up 20%?

Why? Tax is paid on the profits made, not on the rent charged. Landlords are entitled to deduct mortgage interest, letting agent fees, repairs etc from income they receive. They will only pay tax on what is left. For people who have got into BTL there is not likely to be much left to tax. The interesting landlords for tax purposes are those who own houses outright or have very small mortgages on homes bought many years ago.

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