Buy to let landlords are being contacted by HMRC in a campaign which identifies people who may not be declaring their full rental income.
The information is being obtained from governmental departments, banks or the tenancy deposit scheme and will be used to identify and target individuals or businesses.
Landlords in England are limited to taking a five weeks’ deposit for new and renewed tenancies with rent under £50,000 a year or up to six weeks if the annual rent is £50,000 or more.
As most landlords take the maximum deposit, it is not difficult for HMRC to calculate the expected rental income which should be included on a tax return.
Landlords should review their tax position if such a letter is received to identify if any disclosures are needed. If the letter is ignored and it is later found that tax is due, it may lead to an investigation and potentially a criminal prosecution.
HMRC can also find out from lenders who will have a list of their customers with a Buy to Let mortgage, which is the case for one individual who contacted us for help recently.
It’s important to note that HMRC will charge penalties for non-compliance but the penalties are reduced if you ‘come clean’ and declare the tax before they find you.