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HMRC going after landlords after "fruitless" Let Property campaign


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1 hour ago, Dorkins said:

If you don't report anything they definitely won't investigate, if you do then maybe they will. It really doesn't take long.

But they will send mass mailings off to lists of people that come onto their radar. The recipients can either come clean or evade. Those that evade do so knowing that they are on the radar and that there is a clear paper trail.

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29 minutes ago, TonyJ said:

Unless you are a major tax evader, who makes HMRC's personal attention worthwhile, I expect they just rely on paranoia.

But it's hardly paranoia if you receive a letter from HMRC! Your are just taking a calculated risk.

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3 hours ago, Lavalas said:

The MKDong is just cracking on with the show, buying up anything that moves, optimistically philosophising about the perfect lifestyle that BTL has afforded him which bizarrely entails playing snooker in your dressing gown and talking to Paul Barrett on the internet.

:lol:

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3 hours ago, TonyJ said:

Unless you are a major tax evader, who makes HMRC's personal attention worthwhile, I expect they just rely on paranoia.

Some people get away with it but from what I've seen the HMRC aren't in much of a hurry.I've seen a number of people get away with things for 10+ years,then comes the inspection, the bill and the question about where the money for mortgage free house came from.

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9 hours ago, Sancho Panza said:

Some people get away with it but from what I've seen the HMRC aren't in much of a hurry.I've seen a number of people get away with things for 10+ years,then comes the inspection, the bill and the question about where the money for mortgage free house came from.

Indeed.  All about expected values:

Expected cost = probability caught x cost 

Where:

Cost = far higher (financial, emotional, etc) than you think (with a lot of interest)

Probability = far higher than you think, especially over the longer term

Try discount cash flowing that lot!  Humans are cr*p at that.

Of course professional criminals do it all the time and yet quite a few will admit privately when they are in their 60s and count their time inside that it was stupid but seemed ok at the time.

Edited by Fence
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I daresay nothing gets done until HMRC decides to do a project targetting whoever is next on their list.  Probably for ages it wasn't worth it for LLs but now it is so they are the next target group.  I don't suppose they ever do the odd person here and there unless it's a very high net worth individual which could explain the lack of interest in the report Mapatasy gave.

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On 2/22/2018 at 10:10 AM, spyguy said:

 ....HMRC wont look till thy find a need to look, HMRC have not looked as they assume that rent/morrtgage cancel themselves out. And LL should be filling in a SA ax form to declare rental income, even if there's no tax due.

Come S24, there will be tax due - bar someone who has a single BTL and earns sod all.

....

That's very true for most new landlords funding their "investments" with IO mortgages however there are also a lot of "accidental" landlords who have held on to and let their existing flat/house when buying their new home.  I'm sure this is one of the main reasons for the lack of market supply. Many of these properties do not have much or any mortgage on them and will have generated a significant income over the years, which has often not been declared.  Because these folk are often flying "under the radar" of the HMRC and their lenders, they may well not have configured their affairs in the most tax efficient way so there could be large tax bills to pay.

 

 

Edited by InlikeFlynn
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HMRC has been sending out emails for the last (maybe?) year or so offering online courses to Landlords. They seem to be targetting people who already declare rental income. 

I know of someone who does declare their income on their tax return so I am guessing that they will target this group first of all and check their next return.

Accountants are also sending out emails to their clients. If they prepare the actual tax return it will be interesting to see how many stop doing it this way and try to keep under the radar.

These HMRC online courses can be fully subscribed as the person I know had to wait until 2 tries to get on one. There was a question / answer afterwards online (like an old Messenger discussion) with lots of questions from LL who clearly didn't understand (She said).

 

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On 22/02/2018 at 4:21 PM, fru-gal said:

This is why I doubt anything will happen. Even if HMRC have big data/all seeing eye computer system, they need bods on the ground to actually put it all together and investigate. If they don't even have the resources to investigate based on an actual report, then what is the hope of HMRC finding and investigating someone who is well hidden, not reported rent ever or cash in hand. I think it is a bit like the mythical Capita tv detection vans - that either the technology doesn't exist (or it does exist but is not nearly as helpful as they make it out to be and still rely on tip offs, which they ironically cannot then investigate). Osbsorne seemed a bit schizophrenic in the sense that he introduced S24 but then cut HMRC to the bone.

I don't buy this. You could automate it. Take the the returns from the letting agents, for example. Whilst the thread on the landlord forum suggests that the collection of data from lettings agents is news it was actually reported by the Telegraph as beginning in April 2014:

Quote

Ten months on, the Revenue has begun gathering information from a wider range of sources, accountants said. Mark Giddens, a partner at UHY Hacker Young, said HMRC had gone beyond the Land Registry and the electoral roll. “It was not until April this year that the taxman sent out notices to letting agents in which they asked for details to be provided of everyone on their books,” he said.

Source: HMRC turns up heat on landlords, Telegraph, 3 August 2014

If you collect identifying information from the letting agents in the appropriate format (as HMRC appear to be doing) you simply write a bit code which matches the information from the letting agents to the individual's tax file and checks if the income was declared. If the income wasn't declare the system bills on the income you know about from the letting agent having calculated the tax liability on the basis that there were no deductions and no relief. The the system to slap a fine on top just for fun. The system then spits it out as a letter and tell them to pay up or face an investigation. The whole thing can be done without any human intervention whatsoever; the letters just spill out of a machine - addressed, sealed, franked and ready for the post. Once the system is set up the only HMRC employee involved would be a sweaty bloke loading the sack of letters onto the back of a van headed for the nearest postal delivery service sorting office.

I strongly suspect that this is the kind of situation where lack of evidence is not evidence of lack. Lots of personal finance journalism is basically PR and there's no big lender (or similar) with a massive ad budget ramming news of tax dodgers who came a cropper down your throat, so don't hold your breath waiting for an update from The Telegraph on how this has developed since August 2014. From the perspective of 'Wronged Face of Daily Mail Readers' type stuff, presumably virtually none of this goes to court and there are no public disclosure made by HMRC each time some muppet gets caught or fesses up via the Let Property campaign so how does the news get out? It doesn't. People are not phoning up the Mail to explain that they dodged some tax and got caught. If things go wrong for people they have every incentive to keep their mouths shut and pretend it never happened, even to their closest friends and extended family. They just pay up and say nothing.

The HMRC Let Property campaign has been running continually since 2013 (it had in fact running already been running for two years by the time section 24 was announced in July 2015). With falling mortgage interest rates and the tapering in of section 24 there is a mountain of tax revenue there for the taking. Lots of this money will pretty much collect itself for the price of a couple of pieces of A4, a DL envelope and the 2nd class postage. All the Revenue need to do in order to get most of this money collect a bit of data and then ask for the tax to be paid. And we know they are doing both.

 

Edited by Beary McBearface
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2 hours ago, InlikeFlynn said:

That's very true for most new landlords funding their "investments" with IO mortgages however there are also a lot of "accidental" landlords who have held on to and let their existing flat/house when buying their new home.  I'm sure this is one of the main reasons for the lack of market supply. Many of these properties do not have much or any mortgage on them and will have generated a significant income over the years, which has often not been declared.  Because these folk are often flying "under the radar" of the HMRC and their lenders, they may well not have configured their affairs in the most tax efficient way so there could be large tax bills to pay.

 

 

Nope.

You are wrong.

Most accidentsl LL still have mortgages on yhd old place. Theyd have sold an io btl mortgage on the old place.

Seriously, few people can afford 2 houses.

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48 minutes ago, fru-gal said:

I can imagine that they have the algorithms etc but how do they for example "find" someone who partially declares or someone who declares for things which need invoices/receipts to prove they were spurious claims. I just can't imagine HMRC has enough real people to check things like invoices/expenses claims for BTLs where situations are more complicated.. I agree with others that it seems a lot of it is based on paranoia and getting those they think will be scared into reacting to a threatening letter without having to do very much. If half of Newham landlords can get away with not declaring, then it doesn't look very good for HMRC (and these landlords would have to have at least notified HMRC that they were getting rental income, even if no tax due).

On the other hand:

Quote

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.”

Source: Half of landlords in one London borough fail to declare rental income, Guardian, 13 August 2017 

£115m is a lot of paranoia. Also, and this cannot be emphasised enough - on the whole BTLs generate little or no profit.

image.thumb.png.f86f411790015affd80b777c27fe02b3.png

Source

With 32% of surveyed BTL landlords reporting somewhere between a large loss and breaking even and only 5% showing a profitable full-time living that means lots of crappy streams of income showing no tax liability.

Let's say that the £115m in the Guardian article is, for the sake of argument £110m income tax and £5m interest (I've no idea what the split is). If the average tax rate on that income is about 30% then you needed about £400m of profit to generate that tax liability.

Depending on whether they are leveraged or not and how profitable the investment is then that £400m could be generated by a pretty wide range of rent flows and hence the rest of the numbers here need a skip load of salt but do give a (salty) flavour of the devil in the detail.

Let's consider, for the sake of argument - and incorrectly, obvs - that those profits were all generated by 'doing alright' BTL landlords who are showing £3 of profit for every £10 of rent. You'll need about £1,300m of rent to generate those profits. If the average rent is £12k/year then that's about 110,000 years of rent. Even if on average these landlords are being caught for, say, 3 years of rent it's still about 40,000 people.

Continuing the wrong argument, you have about 1 million BTL landlords. A small minority of them control 40% of the stock. The rest are the one-property lot. Hence of the 2 million homes controlled by BTLers, 1.2m are in the hands of the single property leveraged guys most likely to be dodging tax. About 30% of them are making no money, so there are about 800,000 who have a tax liability. If half of them are declaring then there are 400,000 with a tax liability who have not declared.

If the Let Property campaign is getting 1 out of 10 of them to turn themselves in even before section 24 is in place then that is fairly effective paranoia. Of course there are a hat full of parameters in there that you can tweak that will shift that 1 out of 10 figure and I'd suspect that it exaggerates the uptake of the Let Property campaign as reported in 2017. Somebody should FOI the Revenue and get a bit more information ;)

Edited by Beary McBearface
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