Oh dear...HMRC starting to catch up with Landlords...

[oatbake]

"According to anecdotal evidence from mortgage broker Lisa Orme on Facebook, the HMRC "Let Property" campaign seems to have gone up a gear

HMRC's letting campaign moves up a gear...

So far we've had three people come to us this week and say that they've had letters from HMRC having identified that they have letting property and haven't filed tax returns / paid their tax.

If you know anyone that hasn't told HMRC that they're letting out property and filed tax returns, they really should get themselves sorted out now - if you wait for HMRC to contact you, the penalties increase dramatically.":

 

PT's take on things:

https://www.propertytribes.com/hmrc-let-property-campaign-ramping-up-t-127635838.html

It does suggest that Section24 is making BTL landlords worth chasing!

[Fromage Frais]

This has to be like shooting fish in a barrell for HMRC.

No need to go through years worth of invoices like you would for a pub/contractor/shop just get hold of the contract/mortgage and there you go.

And when it goes wrong....a nice property to go after

[longgone]

fabulous news 

low hanging fruit ready for the pot. 

[spyguy]

25 minutes ago, Fromage Frais said:

This has to be like shooting fish in a barrell for HMRC.

No need to go through years worth of invoices like you would for a pub/contractor/shop just get hold of the contract/mortgage and there you go.

And when it goes wrong....a nice property to go after

Just bank details. Slots into excel.

Of course youve not being taking rent as cash have you .....

[Fromage Frais]

3 hours ago, spyguy said:

Just bank details. Slots into excel.

Of course youve not being taking rent as cash have you .....

Oh Sir/Madam i see your household has two properties in your name on the land registry.

Can you please explain what you are doing with the other one please?

Land taxes must be the easiest to collect. 

Edited August 11, 2018 by Fromage Frais

[LandOfConfusion]

I had a 'prompting' letter a couple of years ago which seemed to suggest I was being audited. That was a bit strange as I'm not exactly rich and my accounts straightforward. Even my brother who doesn't work and has hardly any savings thanks to mental health issues got a letter just this week re: how much money do you have. Surly they know supported living isn't exactly free?

But to move on from the lower end and start targeting wealthy BTL'ers, that suggests things are getting more serious. And I can hear the screams already. ?

Edited August 11, 2018 by LandOfConfusion

[North London Rent Girl]

22 hours ago, oatbake said:

PT's take on things:

https://www.propertytribes.com/hmrc-let-property-campaign-ramping-up-t-127635838.html

It does suggest that Section24 is making BTL landlords worth chasing!

This is great news, nice to have it from the horse's mouth. I was so fascinated by that woman's hair arrangement and shirt that I had to watch the video. Am I right in thinking that what we're talking about is basically an amnesty? 'Come forward now tax-dodgers and we'll go easy on you'? This has hitherto completely escaped me. Oh she just said, "almost like an amnesty, really". Hmm. Have they not had time to get it together? So the PTB still being soft on their own, my god, if any of us self-employed people who actually do something for a living were caught dodging they'd come down on us like a tonne of bricks.

[spyguy]

3 hours ago, North London Rent Girl said:

This is great news, nice to have it from the horse's mouth. I was so fascinated by that woman's hair arrangement and shirt that I had to watch the video. Am I right in thinking that what we're talking about is basically an amnesty? 'Come forward now tax-dodgers and we'll go easy on you'? This has hitherto completely escaped me. Oh she just said, "almost like an amnesty, really". Hmm. Have they not had time to get it together? So the PTB still being soft on their own, my god, if any of us self-employed people who actually do something for a living were caught dodging they'd come down on us like a tonne of bricks.

No, not an amnesty.

A We'll be nice and help you pay the tax.

The gloves are off.

 

[Mossie]

11 hours ago, North London Rent Girl said:

This is great news, nice to have it from the horse's mouth. I was so fascinated by that woman's hair arrangement and shirt that I had to watch the video. Am I right in thinking that what we're talking about is basically an amnesty? 'Come forward now tax-dodgers and we'll go easy on you'? This has hitherto completely escaped me. Oh she just said, "almost like an amnesty, really". Hmm. Have they not had time to get it together? So the PTB still being soft on their own, my god, if any of us self-employed people who actually do something for a living were caught dodging they'd come down on us like a tonne of bricks.

Know what you mean.

It's my understanding HMRC will require a BTL coming forward to settle the tax they owe, and will normally also apply a penalty of some kind. 

Just that the process and penalty being easier on the BTLer by coming forward, than if they were caught out directly by HMRC.

All in all though, it doesn't seem there is that much tax to chase from BTLers pre Section 24.  A few £10s of millions maybe? 

Things really get interesting for the taxation into Section 24, for the tax payable is likely to jump on so many BTLers, and I hope to learn more about how HMRC goes about seeking the taxation they are owed by those BTLers who either don't have the cashflow to pay it, or who seek to evade it.

[Freki]

4 hours ago, Mossie said:

All in all though, it doesn't seem there is that much tax to chase from BTLers pre Section 24.  A few £10s of millions maybe? 

Are you kidding me ?

What about all the casual landlords of people going on their next property without selling the first one and not declaring the extra income?

All the BTLERs who maintained their leverage by buying white Evoque's instead of extra property.

In London and the SE, people who bought pre 2014 have a high yield on their property. Mine has an 11% one for buying in 2008. 

But I agree that S24 will exacerbate the amount of money they can go after

[Guest]

They are quick enough to put adds on prime time TV trying to catch single mothers screwing the system for a few quid, why not put a nice big telephone number up on prime time TV grassing up tax dodging landlords. Biggest problem for many people dealing with these scum, violent criminal scum in many cases, is that people do not know who to approach

Edited August 12, 2018 by Guest

[Switch625]

On 10/08/2018 at 17:35, oatbake said:

"According to anecdotal evidence from mortgage broker Lisa Orme on Facebook, the HMRC "Let Property" campaign seems to have gone up a gear

HMRC's letting campaign moves up a gear...

So far we've had three people come to us this week and say that they've had letters from HMRC having identified that they have letting property and haven't filed tax returns / paid their tax.

If you know anyone that hasn't told HMRC that they're letting out property and filed tax returns, they really should get themselves sorted out now - if you wait for HMRC to contact you, the penalties increase dramatically.":

 

PT's take on things:

https://www.propertytribes.com/hmrc-let-property-campaign-ramping-up-t-127635838.html

It does suggest that Section24 is making BTL landlords worth chasing!

Nice find thanks.

Looking at the government website, under the current scheme, if landlords who have underpaid come forward voluntarily they must pay all the tax owed and a fine of 10-20% for the last 4 years to 6 years dependant upon how much they have been under declaring. However if they have not been declaring at all the time frame increases to the last 20 years (some of my past landlords would definitely fall into that bracket)

The video on Property Tribes about the scheme is from 2014 at which time it was being extended for 3-4 years and only 1.5% of tax owed had been declared of an estimated £500 million of unpaid tax, a rather underwhelming success. Unless HMRC declare otherwise this scheme will be closing this year after which they still have to pay all the tax owed and the penalties could be up to 100% of the unpaid liabilities, or up to 200% for offshore related income.

I assume that those who can afford to pay and are running honest business models have already stepped forward, but given the lack of declarations in the first year of the scheme I would guess that the following years have been similarly uninspiring and that an awful lot of that £500 million in unpaid tax is still out there and ripe for the picking.

Section 4.3 of the guidance, "What happens if you cannot pay the full amount" should be scaring the pants off the tax dodgers.

You will need to tell them "what you own, including your home, other property and land, vehicles, investments, money in the bank"

Looks like HMRC is about to get serious and all of this before S24 has an impact. 

I see some long overdue karma about to be settled  

[Take Me Back To London!]

1 hour ago, inbruges said:

The quick enough to put adds on prime time TV trying to catch single mothers screwing the system for a few quid, why not put a nice big telephone number up on prime time TV grassing up tax dodging landlords. Biggest problem for many people dealing with these scum, violent criminal scum in many cases, is that people do not know who to approach

Another interesting article published by Moneyweek and The Financial Times last year. Estimates range up to £180 million for London and £1 billion in the UK for evaded tax by landlords. 

 

https://moneyweek.com/471856/it-pays-to-be-honest-about-your-taxes/

 

 

Quote

 

It pays to be honest about your taxes

By: Merryn Somerset Webb24/08/2017

August. The Edinburgh Festival. To (another) magic show with the kids, this time with “time travelling magicians” Morgan and West. There was something utterly revolting involving needles and a clever biscuit-related mind-reading stunt. But the best trick of all involved — as is often the case in life — money.

West dropped coins taken from a random audience member named Roy into a glass and Morgan appeared to be able to figure out from the sounds they made as they hit the bottom which they were and what they added up to (£3.47 in this case). He then went one better and told us the final four numbers of Roy’s debit card on hearing it dropped into the same glass.

The audience was wowed. They oohed and aahed and looked around for the secret in the glass. I didn’t bother. I had already assumed from his impressive data management skills that Morgan’s day job is at HM Revenue & Customs, in which case knowing the full details of the finances of every member of the audience, down to the junior Sipps of the kids in the back row, would have been a straightforward part of an honest day’s work.

Last year, the tax office launched three consultation papers on how to deal with people operating in the hidden economy — the “ghosts” who declare none of their moneymaking activities and the “moonlighters” who don’t declare all of them.

The first two papers offered simple ideas: be nastier to anyone you catch and inhibit the business activities of those you don’t by making access to services or licences conditional on being registered for tax. Before getting a licence, for instance, landlords of houses in multiple occupation (HMOs) would have to register for self-assessment and cafés would have to do health and safety checks.

The third was all about data. Since 2011, HMRC has been using a computer system called Connect to catch tax dodgers by sifting through huge amounts of seemingly unrelated data (bank and PayPal accounts, credit card data, property transactions, company ownership records and names and addresses from Airbnb, for example). In something of a first for a government computer system, this works pretty well. The last consultation was about extending HMRC’s data-gathering powers to money services businesses (currency exchange and the like).

Add this all up and you will quickly see that any financial privacy any of us once had (and hence any ability to be a long-term moonlighter) is either gone or going.

For a hint of what this means in practice, look to Newham. The London borough runs a property licensing scheme and has 27,000 registered landlords on its lists. But when it gave HMRC the names of those landlords for some simple analysis, it was found that almost half (13,000) are not registered for self-assessment.

This doesn’t necessarily mean all of them are not paying tax on their rents. Small amounts due can be collected via PAYE and some properties will be owned by companies or trusts and separately accounted for. But even if you make allowances for this and assume that, say, 10,000 rather than 13,000 landlords are not properly declaring rent, there is clearly something of a problem here.

Use the average rent in the area (just over £16,000 a year) and £166m of gross rent is not being declared. Assume a 10% profit margin and an average tax rate of 30% (some will be 20% payers and some 40%) and HMRC is down £4.8m in revenues in one London borough alone.

Let’s extrapolate a bit more. There are about 1.75 million landlords in the UK. Let’s assume that across the country there’s a little less cheating than in Newham. That would give us 500,000 non-declarers. Assume their gross rents are much lower than those in London — let’s say £10,000 a year. Then assume a similar profit margin and blended tax rate and we end up with £150m in evaded tax.

My assumptions here have been kinder than some others. A 2014 study by the Institute of Public Policy Research came up with a number of £180m for London alone and one of the UK’s more extreme economists has put the national sum at £1bn. But whatever assumptions you use, you are definitely talking real money. Newham is, says Andrew Hubbard, tax consultant at RSM, clearly the tip of a “very big iceberg”.

You will see that there are two interesting things here. The first is how easy it is to use data to catch people. The second is just how many people there are to catch. The HMRC hidden economy consultation documents make much of the idea that the “vast majority” of UK individuals and companies willingly pay their “fair share” of tax and puts our tax gap (the difference between what we pay and what we should pay) at a mere £6.2bn. But if the numbers in Newham turn out to be anywhere near accurate the authorities are going to have to replace the word “vast” with “tiny” in the introduction to their next consultation.

And the rest of us are going to have to accept that as much as we enjoy haranguing large companies and celebrities about tax avoidance, the real problem — regular, small-to-medium scale evasion — may be happening in our own back yards.

We might also note that individual evasion is more of a problem than it used to be. Thirty years ago, if someone earning very little didn’t register for tax, it made no real difference to anyone. If there is very little tax to pay, who cares if you register? Today, the system pays significant amounts to low-income earners in the form of tax credits. Deliberately under-declare and claim tax credits too and the cost to the honest taxpayer (and by long-term extension, the honest tax credit claimant) can be pretty high. Have a declared income of £10,000 and three children and you can be paid another £12,205 in tax credits alone.

Perhaps if every riding school, garage, landlord, personal trainer, café owner, dog walker and builder (you can get a sense of which professions dodge most here on HMRC’s deliberate defaulter “name and shame” list) had their data analysed by Connect, the UK’s obscene deficit might look very significantly smaller.

If all this talk of the power of data is making anyone feel more nervous now than they were in paragraph one of this article — and given how many readers are also landlords, statistically a good few of you must be — it is time to take some action (ask your accountant about the Let Property Campaign if you are an errant landlord, for instance).

If HMRC thinks you have made a careless error, they might investigate you going back six years. If it thinks you are a deliberate defaulter, that will be 20. You’ll pay back what they say you owe (the appeal process is not a happy one) and you’ll pay penalties and interest too. This article is mostly about how you should manage your finances. Given the potential downside of being a ghost or a moonlighter, these days a large part of the answer has to be “honestly”.

 

 

Edited August 12, 2018 by Take Me Back To London!

[Guest]

32 minutes ago, Take Me Back To London! said:

Another interesting article published by Moneyweek and The Financial Times last year. Estimates range up to £180 million for London and £1 billion in the UK for evaded tax by landlords. 

People say these tax evasion cases should be reported, but if only it was that easy. I could provide a list as long as your arm of rental tax evasion. I have reported Housing benefit fraud along with reporting someone gaining council housing by fraud using her multiple BTL mother to pretend to kick her out of the family home, and I have reported endless time landlord tax evasion, I have never seen one sign of it ever working and as blatant and easy to prove as it was.

I should have know better after the mass self cert fraud of the early 2000's which was probably the easiest mass crime to prove that ever existed and was just ignored.

[Switch625]

27 minutes ago, Take Me Back To London! said:

Another interesting article published by Moneyweek and The Financial Times last year. Estimates range up to £180 million for London and £1 billion in the UK for evaded tax by landlords. 

 

https://moneyweek.com/471856/it-pays-to-be-honest-about-your-taxes/

 

 

 

Thanks Take,

Nice article.

The author recognises that their estimate is probably on the low side, but assuming that £150m of unpaid tax per year is true, if we assume that HMRC looks back an average of 5 years for each tax dodger and fines them 15% as well. The total income from this for HMRC is more than £860 million, certainly worth chasing.

If you take the more extreme end of the tax evasion estimates quoted in the article at £1 billion a year it is closer to £6 billion owed.

As ususal when dealing with estimates the truth may be higher or lower, but often lies somewhere between the two, whatever the true figures we are talking serious money and my take on this is that the dishonest tax evaders have been living the high life, squandering the cash on things that have little or no realisable value, as such they will be unable to service their debts when the tax man comes knocking.

[anonguest]

34 minutes ago, Switch625 said:

Thanks Take,

Nice article.

The author recognises that their estimate is probably on the low side, but assuming that £150m of unpaid tax per year is true, if we assume that HMRC looks back an average of 5 years for each tax dodger and fines them 15% as well. The total income from this for HMRC is more than £860 million, certainly worth chasing.

If you take the more extreme end of the tax evasion estimates quoted in the article at £1 billion a year it is closer to £6 billion owed.

As ususal when dealing with estimates the truth may be higher or lower, but often lies somewhere between the two, whatever the true figures we are talking serious money and my take on this is that the dishonest tax evaders have been living the high life, squandering the cash on things that have little or no realisable value, as such they will be unable to service their debts when the tax man comes knocking.

......and so presumably forced sales flooding on to the market? 

[Mossie]

3 hours ago, Freki said:

Are you kidding me ?

What about all the casual landlords of people going on their next property without selling the first one and not declaring the extra income?

All the BTLERs who maintained their leverage by buying white Evoque's instead of extra property.

In London and the SE, people who bought pre 2014 have a high yield on their property. Mine has an 11% one for buying in 2008. 

But I agree that S24 will exacerbate the amount of money they can go after

In many cases, it seems to me, they could keep their 'profits' low after ever more debt, because of tax-relief.  Such as how some of the BTLers still qualified for tax-credits.

It's just I recall an article where HMRC were saying the actual tax outstanding from BTL side was not as high as some of the numbers reported elsewhere, but then there are all these articles also referring to HMRC of mega-tax outstanding by the BTLers and property investors.  

What I am in no doubt about is all the while, for so many many years, all the honest families paying up to the BTLers, from their fully-taxed incomes, with BTLers who have been a major part of rentierism, HPI, in buying up family homes by the millions.  BTL been a total greed and self-centered situation for so many years, and needs to be sorted out big time.

I have followed HM Customs & Excise on Twitter for a long time.   So many HMRC 'catch cases' are about tobacco smuggling and schemes to 'claim back' from HMRC.   Been waiting a long time to see any revenue cheating BTL landlords appear.   It would be a big shift if they do begin to appear and treated as hard tax-cheats.

https://twitter.com/HMRCpressoffice

https://twitter.com/HMRCgovuk

[Bland Unsight]

22 hours ago, North London Rent Girl said:

This is great news, nice to have it from the horse's mouth. I was so fascinated by that woman's hair arrangement and shirt that I had to watch the video. Am I right in thinking that what we're talking about is basically an amnesty? 'Come forward now tax-dodgers and we'll go easy on you'? This has hitherto completely escaped me. Oh she just said, "almost like an amnesty, really". Hmm. Have they not had time to get it together? So the PTB still being soft on their own, my god, if any of us self-employed people who actually do something for a living were caught dodging they'd come down on us like a tonne of bricks.

Bit of detail here:

 

[Gribble]

Deciding on BTL tax evasion is a no brainer.

HMRC will tax you twice the  amount of tax due.  Plus the threat of an average  two year prison sentence.

Sleepless nights; just aint worth it. Plus its morally theft 

 

[Mossie]

13 minutes ago, Gribble said:

Deciding on BTL tax evasion is a no brainer.

HMRC will tax you twice the  amount of tax due.  Plus the threat of an average  two year prison sentence.

Sleepless nights; just aint worth it. Plus its morally theft 

And they are also each part of the housing financilisation and creating generation rent by their choice of actions (for the most part).

HMRC can charge 200% penalty for some matters (maybe more) according to some recent HMRC material I have read.  Maybe more?  It seems on some matters of deliberate evasion that HMRC can go back 20 years (?). 

Houdini pointed out how HMRC are really tightening up on Loan Scheme stuff at some near future point.

Then there's this RTC/FTC stuff that HMRC look primed to get busy with.  I just hope it can be used to handle BTLers offshore, and stop them getting away with non-tax rent, no capital gains and hopefully smash through BICT and stuff.

Quote

Published 16 November 2017 
Last updated 11 July 2018

This guidance provides information about the new Requirement to Correct (RTC) legislation. It explains what the RTC is and provides information for those who are required to disclose information to HMRC under the new RTC rule before the deadline of 30 September 2018.

The Requirement to Correct (RTC) rule
This new legal requirement is included at Section 67 and Schedule 18 of the Finance (No. 2) Act 2017 and creates an obligation for anyone who has undeclared UK tax liabilities that involve offshore matters or transfers to disclose the relevant information about this non-compliance to HMRC by 30 September 2018.

Failure to disclose the relevant information to HMRC on or before 30 September 2018 will result in the person becoming liable to a new penalty as a result of their failure to correct (FTC). The new FTC penalty is likely to be much higher than the existing penalties, with a minimum penalty of 100% of the tax involved.

To avoid becoming liable to these new higher penalties, a person must correct the position by no later than 30 September 2018. If they do this, the tax and interest will be collected and the existing penalty rules will apply. We explain in more detail what must be done by 30 September 2018 below.

If taxpayers are unsure whether they have undeclared UK tax liabilities that involve offshore matters or transfers, they should check their affairs and if necessary put things right before they become liable to the new FTC penalties that will come into force on 1 October 2018.

...Offshore Asset Moves Penalty
Schedule 21 to Finance Act 2015 introduced a new enhanced penalty for cases where it can be shown that you moved assets to avoid having details reported to HMRC under international agreements on exchange of information.

The penalty is equivalent to 50% of the amount of the standard penalty and is charged in addition to the standard penalty. This enhanced penalty provision applies to the RTC rule and will be equivalent to 50% of the FTC penalty.

...Penalties and other sanctions for not correcting on or before 30 September 2018
If you fail to correct on or before 30 September 2018, you will be liable to the new, tougher FTC penalties. There are a number of elements to these penalties:

Standard Penalty
In all cases where a penalty applies, there will be a standard penalty equivalent to 200% of the tax liability which should have been disclosed to HMRC under the RTC but was not. This penalty can be reduced to reflect any combination of the following factors:

your level of co-operation with HMRC
the quality of your disclosure to HMRC (including telling HMRC of anyone who helped enable your non-compliance)
The reduction will take account of whether you came forward voluntarily to tell HMRC of your failure but the reduction cannot reduce the penalty to less than 100% of the tax involved.

Failure to correct (FTC).

I picked it up on one of HMRC Twitter Accounts:  https://www.gov.uk/guidance/requirement-to-correct-tax-due-on-offshore-assets

[Bland Unsight]

5 hours ago, Mossie said:

Then there's this RTC/FTC stuff that HMRC look primed to get busy with.  I just hope it can be used to handle BTLers offshore, and stop them getting away with non-tax rent, no capital gains and hopefully smash through **** and stuff.

You are Mark Alexander and I claim my £5.

At first a butcher's boy, then later a pseudonym pretending not to be a butcher's boy and mocking a butcher's boy to get some free promotion 

Just pony up for the advertising. There's more dignity in that course of action

Edited August 13, 2018 by Bland Unsight

[Ah-so]

It would seem though that HMRC do not prosecute the rich and powerful, and have now openly admitted it.

We allow the rich to escape charges, admits taxman

HMRC says secret deals are done to avoid denting the reputations of the powerful, sparking fears for equality under the law

https://www.thetimes.co.uk/article/we-allow-the-rich-to-escape-charges-admits-taxman-pb307srkq

 

Edited September 9, 2018 by Ah-so

[dpg50000]

32 minutes ago, Ah-so said:

It would seem though that HMRC do not prosecute the rich and powerful, and have now openly admitted it.

We allow the rich to escape charges, admits taxman

HMRC says secret deals are done to avoid denting the reputations of the powerful, sparking fears for equality under the law

https://www.thetimes.co.uk/article/we-allow-the-rich-to-escape-charges-admits-taxman-pb307srkq

 

FFS - this is the kind of thing you always knew likely happened, but when it's confirmed you just think, "Why am I bothering to work hard and try to get ahead?" 

 

More and more, it's looking like cutting my expenditure to as low as possible, then working as little as possible is the way to go.

[Ah-so]

27 minutes ago, dpg50000 said:

FFS - this is the kind of thing you always knew likely happened, but when it's confirmed you just think, "Why am I bothering to work hard and try to get ahead?" 

 

More and more, it's looking like cutting my expenditure to as low as possible, then working as little as possible is the way to go.

Surprised they admitted it. It's always been obvious given how few convictions we had. I did err on the side that HMRC was more concerned with getting money than convictions so would prefer to settle out of court rather than risking going for an expensive  prosecution that might not go the right way.

But no, they don't want to inconvenience the rich and powerful. 

[Lavalas]

Strangely quick and direct response from HMRC to that story...

I supoose they would say that.