Tuesday, October 29, 2013

Only 50% of Landlords registerd with HMRC.

Landlord tax crackdown

Fewer than 500,000 taxpayers are registered with HMRC as owning properties other than their home. And yet other sources put the number of Britain’s growing army of landlords at between 1.2million and 1.4million. Why the discrepancy? No one can say for sure, but the taxman has his answer: not enough people are declaring – and paying tax on their property incomes and gains. HMRC has a lot of weaponry at its disposal. It can cross-check taxpayers’ records with Land Registry data and, if it wishes to, can go on to request data from third parties such as lettings agents. Banks are another source of information, as taxman can ask for information about mortgages advanced to landlords Tenancy deposit protection was designed to protect tenants but it added a useful string to HMRC’s bow.

Posted by khards @ 09:35 AM (3387 views)
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17 thoughts on “Only 50% of Landlords registerd with HMRC.

  • For once I’m rooting for HMRC…..

    Sure they’ll balls it up though. It takes them a decade to do anything of note…

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  • Think they need to clamp down and focus [accept the problem would be a start] on the corporates who sell sh1t in the UK but don’t pay tax on the profits here.

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  • Currently landlords who to buy to let have been crowding out first time buyers for London Properties and now it looks like at least half are dishonest motivated by greed.

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  • mark wadsworth says:

    It is absolutely staggering what HMRC let landlords get away with. There are so many databases they can trawl and cross-reference etc:

    1. Banks know who has a mortgage, anybody who shows up with more than 1 is a candidate, and anbody with a BLT mortgage is anyway.

    2. Local councils know who the occupants are (council tax payers and electoral roll) and HM Land Reg knows who the owner is. If they differ – another candidate.

    3. Sales and purchases have to be reported to HM Land Reg, any name shows up more than once in five years is probably a landlord or a speculator/developer.

    4. Any home owned by a company or a partnership is likely landlord or developer.

    5.. If there is any mismatch whatsoever between who lives there, who pays insurance, is on electoral roll etc etc, yet more candidates.

    Some clever computer guy could match up all these databases in a few days or weeks and run the diagnostic, that will flush out a million candidates, some of whom are already paying tax like gentlemen and ninety per of the rest get a good kicking.

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  • Many upmarket properties are owned by chinese boxes (often with bearer shares that don’t show the owners’ names) registered in the British Virgin Isles, with associated companies (post boxes?) registered on scattered sunny islands where the odd iguana slouches past. The Land Registry knows only that these properties are owned anonymously offshore and sales of property can go unrecorded at the LR, so no SDLT. The taxes these companies avoid or reduce are mainly stamp duty and capital gains and inheritance taxes. I don’t know how much tax on rent is avoided this way. Tenants are supposed to withhold a proportion of rent for HMRC if they’re paying it to a landlord in Gibraltar, BVI or some other tax haven.

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  • Yes Mark but none of that would be necessary if the grinning idiot Grant Shapps hadn’t cancelled the landlord registry.

    Actually the nearest thing we have is the deposits registry organisations but those of course only hold deposits of those where the tenancy is legal and more importantly taken after the act requiring them was introduced (whenever that was – 2008?)

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  • mark wadsworth says:

    Icarus, yes, fair point, but if you live in a home owned by your own company, you are liable to a benefit in kind charge if you are a director or shadow director of the company, and similar tax charges for beneficiaries of trusts (all very complicated).

    So these Chinese boxes are good (or certainly no worse) for CGT, IHT and SDLT, but the price of that is paying income tax instead, or indeed the ATED (Mansion Tax lite).

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  • @7 Mark, I’d be facilitated to see how much benefit in kind tax occupiers of offshore owned properties pay. My guess is √f-all. If HMRC can’t get its act together and compare two databases, what are the odds of it trying to untangle the strings of trusts/companies/etc? Much better to just do the ATED on the presumption of guilt. They should offer the chance for people to exempt themselves from the ATED if they come forward and disclose publicly who owns the company, right down to the beneficiaries of the various trusts, etc. An annual filing would be required and any changes in beneficial ownership would trigger SDLT. My guess is that all of the dirty money behind these pads will be more than willing to pay ATED for anonymity.

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  • Icarus
    I take exception, I do not slouch.
    I take the other points though, galling though it is, the sums avoided by the btl even if we go as far as CGT when the portfolios are sold in a panic are as nought when compared with the daily abuse of the tax system by the banks and other larger corporates.

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  • doomwatch @ 2 – I surprise myself by not having a problem with those companies. They are just playing by the rules and have figured out they get a return on investment if they spend a fortune on lawyers and accountants to advise them how to minimise their liabilities. It’s the politicians who need shooting for making up rules which can be got around. At least these landlords are actually breaking the law so they CAN be prosecuted.

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  • MW @ 4. Clearly you don’t have a clue about systems [“a guy a few weeks” LOL] or the protection laws around the data they hold.

    TT @ 10. The cost of finding & prosecuting a few “forgetful” landlords will probably not net off a gain for HMRC. On the other hand, new legislation that allows HMRC to enforce tax collection from corporates who DELIVER CONSUMABLES INSIDE THE UK to UK BASED END CONSUMERS [I don’t care where there servers, HQ, or depot is based, for tax avoidance] will net them billions.

    Problem is, is the House of Lords “influenced” by the corporates. Hmmmm.

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  • @11 I’m with TT and it sounds like you are too. They need to change the law. Companies will always try to game the system. All the government needs to do is ban tax deduction upon payments to foreign subsidiaries based in tax havens.

    The problem, as you rightly point out, is that there isn’t the political will. So, the politicians tell off the MNCs for following the rules in the way that sees them pay no tax without changing anything. They then continue with their flagship policy of lowering corporation tax to encourage more businesses to move here, even though the FTSE is already rife with foreign companies and MNCs based in the UK clearly don’t pay corporation tax anyway.

    It’s almost as if they weren’t really trying to entice foreign MNCs to relocate to the UK, but were really interested in lowering tax rates for UK businesses (and perhaps even the rich people who pose as them for tax purposes). And whether or not you agree with that aim longterm, it’s still a disgustingly ideologically-motivated giveaway at a time when money is supposedly tight and the rich are supposed to be sharing the burden.

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  • As for landlords, rents are at an all-time high and interest rates are at an all-time low. They’ve never been making as much profit. It is “unearned income” as the economists say, and the fact that they’re not declaring it, is considerably more disgusting than Google/Amazon abusing our weak tax system to limit their liability.

    Even if they lose money in the process, they should go after them surely? However…

    With 1m tax-dodgers, the average landlord only has to be making £5k profit across all their flats to raise over £1bn in corp tax. That’s not an insignificant amount of money and I doubt the HMRC spends that much a year.

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  • reticent @13. It’s classed by HMRC as income, attracting income tax at the relevant rate. Corporation tax is nothing to do with it.

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  • mark wadsworth says:

    DW: “MW @ 4. Clearly you don’t have a clue about systems [“a guy a few weeks” LOL]”

    Brilliant, if you were an expert you’d explain how long it would actually take, but as you clearly are not and cannot you resort to insults. That doesn’t win you any friends or influence people.

    If you ask KPMG or Capita do trawl the databases, of course it will take three years and cost £1 billion and still not work. We all know that

    But if you tell HMRC to get on with it, they’ll manage just fine. I know that for a fact because unlike you I have at least some experience in these things and know people.

    Glad to have cleared that up!

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  • Doomwatch, those lawyers and accountants are paid millions because the tax law is so complicated and getting around it is complex. Whilst philosophically I agree with you, these companies “should” pay more tax, the fact is that they are not acting illegally. If anything, the politicians are acting illegally, because company directors are legally obliged to act in the best interests of the company; not the employees, not the customers and certainly not taxpayers. If a company’s FD therefore has a tax structure which is not in the company’s best interests, he is breaking the law, and encouraging someone to break the law is (I think) also illegal. The irony is that the politicians who have a go at companies for it are the very same people who write the rules. They all want firing for gross negligence.
    Going after a few landlords might not significantly change the tax take, but HMRC getting what you and I think companies should be paying in Corporation tax will require law changes and that will take far longer.

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  • @14 Right you are, sir. All your talk of corporation tax got me all muddled up.

    But that makes it more like £2bn. Still think they shouldn’t bother?

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