The number of overseas landlords admitting tax avoidance has risen 65 per cent in five years according to an accountancy firm.
Moore, which has analysed tax data, says 390 overseas buy to let landlords admitted to HM Revenue and Customs they have not been paying the right amount of tax last year - that’s up from 237 in 2015/16.
A total of 1,502 overseas landlords have admitted that they have been underpaying tax over the last five years.
Moore says these landlords, many of whom are foreign-based expats rather than wealthy investors from overseas, let out property in this country and are coming forward in response to HMRC’s Let Property Campaign.
Luci Parry, a partner at Moore, says: “The ability of HMRC to conduct cross-border investigations quickly and easily has overseas landlords running scared – prompting many to come forward.
“Many overseas landlords who have fallen behind on their tax payments do not want to get embroiled in lengthy, costly investigations. Especially given many investigations into suspected unpaid tax result in heavy penalties and potentially criminal charges.
“The tax affairs of buy-to-let landlords has been a key area of focus for HMRC and it shows no signs of letting up. HMRC’s latest initiative involved bulk mailing thousands of warning letters to landlords asking them to declare their income.”
Moore warns that HMRC has become increasingly effective in identifying landlords who are not paying the right amount of tax on their rental income.
To do this, HMRC has been using global data to obtain bank statements for foreign bank accounts used by overseas landlords to see what income they are receiving, and has been reviewing Tenancy Deposit Schemes to cross reference landlords against those declaring rental income.
The penalty for undeclared rental income is up to 100 per cent of the amount of tax HMRC believes is owed. If a landlord comes forward and makes a disclosure they are likely to face lower penalties.
Parry adds: “There is a clear-cut case for coming forward and declaring income as HMRC is likely to be more lenient in the penalties it issues. If you wait until HMRC finds you have unpaid tax then the punishment will be much harsher, in some cases by several multiples.”
Want to comment on this story? If so...if any post is considered to victimise, harass, degrade or intimidate an individual or group of individuals on any basis, then the post may be deleted and the individual immediately banned from posting in future.