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Snugglybear

Half of landlords in one London borough fail to declare rental income

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https://www.theguardian.com/business/2017/aug/13/half-of-landlords-in-one-london-borough-fail-to-declare-rental-income

 

"Up to 13,000 landlords in just one London borough have been identified as failing to declare their rental income, prompting estimates that unpaid tax in the capital is costing the public purse nearly £200m.

Newham council in east London, the first to introduce a compulsory borough-wide licensing scheme for landlords in 2013, shared their names and property addresses with HM Revenue & Customs. Newham, which has 27,000 registered landlords, said it understands that 13,000 had not registered for self-assessment, which is generally required if a property owner receives £2,500 a year or more in rent. HMRC would not confirm the figure.

The council estimated that unpaid tax by landlords is costing the public purse nearly £200m in London – and far more nationally. 

In a letter sent to the chancellor, Philip Hammond, the mayor of Newham, Sir Robin Wales, said: “It is our understanding that, to date, up to 13,000 Newham landlords are of interest to HMRC, where there are discrepancies between declared income and our records, with potentially significant financial implication for the exchequer.”

Newham is battling with the Department for Communities and Local Government to have its licensing scheme renewed, following a 2015 clampdown by the government, which said licensing imposes “unnecessary additional costs” on landlords. Neighbouring borough Redbridge has already had its application for landlord licensing rejected.

Wales told the chancellor in his letter: “Our core grant funding has halved since 2010-11, that’s less money for our schools, less money for social care, and less money for housing. I urge you to assess the additional benefits of Newham’s licensing scheme in assisting the exchequer to address tax evasion by landlords.”

Newham said it understands that HMRC is currently contacting local landlords who have failed to register their rental revenues. The tax authorities have the power to claw back unpaid tax over 20 years, with penalties of up to 100% of the tax demanded.

In a statement, HMRC said: “We are working with the London Borough of Newham as part of the Let Property Campaign. This work has generated £115m in additional and previously unpaid tax and interest.”

The Treasury did not respond to a request for comment.

HMRC’s Let Property Campaign was launched in 2014 amid concerns that up to 1m buy-to-let landlords are not declaring their rental income. HMRC said at the time that it believed landlords were avoiding around £550m in tax, although Newham’s experience may suggest that the figure could be much higher. 

Newham said it has instigated 1,135 prosecutions for housing crimes – 70% of all such prosecutions in London. It has banned 28 landlords, served 2,170 notices to improve properties, and recovered £2.6m in additional council tax.

Before Newham began mandatory landlord licensing, it had estimated that the borough had 30,000 private properties rented out by around 5,000 landlords. But as a result of the licensing process, it discovered 50,000 rental properties owned by 27,000 separate landlords.

Newham has among the highest levels of private renting in the UK. Between 2006 and 2016, the share of the total housing stock in the borough owned by private landlords leapt from 21% to 46%, with just 23% of homes now owner-occupied.

Liverpool, Waltham Forest, Barking and Dagenham, and Croydon have all introduced compulsory licensing schemes following Newham’s success, but other boroughs hoping to match them have run into opposition from central government.

Since 2015, local authorities have been forced to apply to the secretary of state for permission to license landlords if the scheme affects more than 20% of the homes in the borough or its geographical area.

Housing minister Brandon Lewis wrote to local authorities in March 2015 to warn them of an amendment to licensing rules. He said: “The blanket licensing approach adopted by some local authorities has major drawbacks. This is because it impacts on all landlords and places additional burdens on reputable landlords who are already fully compliant with their obligations, thereby creating additional unnecessary costs for reputable landlords which are generally passed on to tenants through higher rents.

“The vast majority of landlords provide a good service and the government does not believe it is right to impose unnecessary additional costs on them, or their tenants. Such an approach is disproportionate and unfairly penalises good landlords.”

However, Newham said its licensing had won the support of 90% of local residents, and that the the vast majority of landlords have had to pay just £150 for a five-year licence. However its fee for new landlords is planned to rise to £400. Liverpool charges £400 for the first property and £350 for each additional property. 

Newham’s scheme comes to an end in December, and because of the restrictions imposed in 2015, it has been forced to apply for permission for another five-year period. The council made a formal application to the government to continue its scheme last month."

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Up to 13,000 landlords in just one London borough have been identified as failing to declare their rental income, prompting estimates that unpaid tax in the capital is costing the public purse nearly £200m.

Before Newham began mandatory landlord licensing, it had estimated that the borough had 30,000 private properties rented out by around 5,000 landlords. But as a result of the licensing process, it discovered 50,000 rental properties owned by 27,000 separate landlords.

 

Hardly a surprise, and confirming suspicions on here about small scale BTL paying tax

https://www.theguardian.com/business/2017/aug/13/half-of-landlords-in-one-london-borough-fail-to-declare-rental-income

 

Edit - just noticed this was already posted  - feel free to merge

Edited by Clarky Cat

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I like this bit 

Newham said it understands that HMRC is currently contacting local landlords who have failed to register their rental revenues. The tax authorities have the power to claw back unpaid tax over 20 years, with penalties of up to 100% of the tax demanded.

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3 minutes ago, Funn3r said:

I like this bit 

Newham said it understands that HMRC is currently contacting local landlords who have failed to register their rental revenues. The tax authorities have the power to claw back unpaid tax over 20 years, with penalties of up to 100% of the tax demanded.

You may like less the fact that the Government is trying to shut down schemes to register all landlords in a local authority area  - the very kind of scheme that has brought this to light.

Depriving HMRC of the data it needs to contact landlords and demand tax.

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12 minutes ago, Snugglybear said:

You may like less the fact that the Government is trying to shut down schemes to register all landlords in a local authority area  - the very kind of scheme that has brought this to light.

Depriving HMRC of the data it needs to contact landlords and demand tax.

Really? Linky if poss. :)

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How does this happen? Is there no registry or anything? I know someone who has a BTL since 2008 and never paid a penny although he rents it to a family member so that may make it different 

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11 minutes ago, Si1 said:

Really? Linky if poss. :)

Some paragraphs from the Guardian story:

"Newham is battling with the Department for Communities and Local Government to have its licensing scheme renewed, following a 2015 clampdown by the government, which said licensing imposes “unnecessary additional costs” on landlords. Neighbouring borough Redbridge has already had its application for landlord licensing rejected.

...

"Liverpool, Waltham Forest, Barking and Dagenham, and Croydon have all introduced compulsory licensing schemes following Newham’s success, but other boroughs hoping to match them have run into opposition from central government.

Since 2015, local authorities have been forced to apply to the secretary of state for permission to license landlords if the scheme affects more than 20% of the homes in the borough or its geographical area.

Housing minister Brandon Lewis wrote to local authorities in March 2015 to warn them of an amendment to licensing rules. He said: “The blanket licensing approach adopted by some local authorities has major drawbacks. This is because it impacts on all landlords and places additional burdens on reputable landlords who are already fully compliant with their obligations, thereby creating additional unnecessary costs for reputable landlords which are generally passed on to tenants through higher rents.

“The vast majority of landlords provide a good service and the government does not believe it is right to impose unnecessary additional costs on them, or their tenants. Such an approach is disproportionate and unfairly penalises good landlords.”"

Eit: to include additional relevant paragraph

Edited by Snugglybear

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5 minutes ago, monkey100 said:

How does this happen? Is there no registry or anything? I know someone who has a BTL since 2008 and never paid a penny although he rents it to a family member so that may make it different 

No, there is no full registry.  Well, except in Liverpool, Waltham Forest, Barking and Dagenham and Newham. Other attempted schemes have been / are being opposed by the government.

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3 minutes ago, Snugglybear said:

No, there is no full registry.  Well, except in Liverpool, Waltham Forest, Barking and Dagenham and Newham. Other attempted schemes have been / are being opposed by the government.

I do hope that this is also partially because their HMRC big data project should pick up secret landlords anyway, at less cost. Local councils can be rather good at job creation schemes....

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2 minutes ago, Si1 said:

I do hope that this is also partially because their HMRC big data project should pick up secret landlords anyway, at less cost. Local councils can be rather good at job creation schemes....

I think it is more the case that so many MPs are landlords and they don't want to do anything that will harm themselves or their relatives/friends interests. They are generally self-serving first.

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4 minutes ago, fru-gal said:

I think it is more the case that so many MPs are landlords and they don't want to do anything that will harm themselves or their relatives/friends interests. They are generally self-serving first.

How many MPs.

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5 minutes ago, fru-gal said:

I think it is more the case that so many MPs are landlords and they don't want to do anything that will harm themselves or their relatives/friends interests. They are generally self-serving first.

I do fear this.

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5 minutes ago, Si1 said:

I do hope that this is also partially because their HMRC big data project should pick up secret landlords anyway, at less cost. Local councils can be rather good at job creation schemes....

You would hope so, wouldn't you, but the Let Property campaign started in September 2013, when HMRC reckoned that there were about 1.5 million landlords in the UK, thougjh it had fewer than 500,000 on its books. By the beginning of 2015 it had written to 50,000 individuals it thought should be submitting property income details. That left some 950,000 if its starting figure was correct - that's a big "if" considering that Newham had estimated that the it had 30,000 private properties rented out by around 5,000 landlords, but found 50,000 rental properties owned by 27,000 separate landlords.

I wonder how many HMRC has written to up until now.

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37 minutes ago, Snugglybear said:

You may like less the fact that the Government is trying to shut down schemes to register all landlords in a local authority area  - the very kind of scheme that has brought this to light.

Depriving HMRC of the data it needs to contact landlords and demand tax.

I do like that a lot less. Even so, at least HMRC have now been alerted that a rich seam exists to be mined. Strange they let it go for so long to my mind. 

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Just now, Funn3r said:

I do like that a lot less. Even so, at least HMRC have now been alerted that a rich seam exists to be mined. Strange they let it go for so long to my mind. 

To be fair, HMRC hasn't left it unmined.  As I said above, the Let Property campaign started in September 2013. 

But the data has to come from multiple sources and, automated letters aside, has to be dealt with by human investigators.  Does HMRC have the resources to do something meaningful?

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40 minutes ago, Snugglybear said:

You may like less the fact that the Government is trying to shut down schemes to register all landlords in a local authority area  - the very kind of scheme that has brought this to light.

Depriving HMRC of the data it needs to contact landlords and demand tax.

Hmrc knows who has title on houses and who has mortgages.

Hmrc does not need fckall from useless LAs.

Hmrc has not been chasing undeclared rental income as, as long as they offsetting mortgage iinterest, theres been no tax collect. That situation is different now.

The campaign to declare rental income is hmrc being nice. Once theres tax due they are coming after it.

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19 minutes ago, Snugglybear said:

No, there is no full registry.  Well, except in Liverpool, Waltham Forest, Barking and Dagenham and Newham. Other attempted schemes have been / are being opposed by the government.

LL register is just a LA compluance thing. Hmrc knows who has mortgages, who owns houses, and how much money is psud un rent.

LR for title info, followed by a mortgage search. Once theyve got addresses they can look at standing orders going into a bank.

Lets say theres 5m LL in the Uk. You can crunch that data in 4h, then sort it by most tax due.

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4 minutes ago, spyguy said:

Hmrc knows who has title on houses and who has mortgages.

Hmrc does not need fckall from useless LAs.

Hmrc has not been chasing undeclared rental income as, as long as they offsetting mortgage iinterest, theres been no tax collect. That situation is different now.

The campaign to declare rental income is hmrc being nice. Once theres tax due they are coming after it.

I wonder how many of the 27,000 landlords in Newham HMRC would have known about were it not for the council's registration scheme.

HMRC's statement said "“We are working with the London Borough of Newham as part of the Let Property Campaign. This work has generated £115m in additional and previously unpaid tax and interest.”

So I'm guessing the figure would be nothing like 27,000.

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4 minutes ago, spyguy said:

LL register is just a LA compluance thing. Hmrc knows who has mortgages, who owns houses, and how much money is psud un rent.

LR for title info, followed by a mortgage search. Once theyve got addresses they can look at standing orders going into a bank.

Lets say theres 5m LL in the Uk. You can crunch that data in 4h, then sort it by most tax due.

Are they doing that, though?

If they're crunching the numbers proactively, why do they need a whole system to encourage landlords to declare income from letting https://letproperty.campaign.gov.uk/ ?

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