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HMRC discovers huge numbers of landlords avoiding paying tax

A national accountancy firm says HM Revenue & Customs has discovered huge numbers of landlords avoiding paying tax - as many as 14 landlords per 100,000 population in some locations.

UHY Hacker Young, analysing data from the HMRC Let Property Campaign, says London commuter towns make up all the top five hotspots for tax avoidance by buy to let landlords .

Ilford had the highest number of landlords per capita in the country admitting that they have underpaid the tax on their property income in the last year (14.3 landlords per 100,000 people). 

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In second place was Slough, with 12.6 landlords admitting they had underpaid tax per 100,000, followed by Dartford (12.1), Luton (11.6) and Enfield (11.3).

These disclosures of tax avoidance by buy to let landlords were made under HMRC’s Let Property Campaign. 

The campaign proactively mail shots buy to let landlords suspected of avoiding tax on their rental income warning them of the consequences of tax avoidance.

The campaign has been successful at encouraging millions of buy-to-let landlords to come forward and declare unpaid tax – partly to avoid a full-blown tax investigation. 

The total amount of additional tax collected by HMRC through the campaign amounted to £17.7m in the last year.

UHY Hacker Young claims that HMRC’s Connect AI system detects targets for the Let Property Campaign by automatically cross-referencing data from sources including council tax bills, the Land Registry and even Rightmove and Zoopla listings.

Buy to let is seen as a relatively accessible investment for individuals, with almost 2.7m private landlords in the UK. 

However, many buy to let landlords are not professional investors and may fail to seek professional tax advice, potentially leading to mistakes and omissions in tax returns.

Neela Chauhan, partner at UHY Hacker Young, says: “HMRC sees rich pickings in the buy to let market in terms of unpaid tax. The amounts collected from landlords who have voluntarily come forward suggest they may be right in their assessment.

“Landlords leave themselves vulnerable to prosecution and even a prison sentence if they fail to declare the correct amount of rental income or pay Capital Gains Tax on the sale of buy to let properties.

“Given the consequences of laying low, proactively admitting a possible error to HMRC is unquestionably the prudent course of action.”

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    By comparison, it seems that the northern LLs are good boys and girls?

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    😅👏Lol 😂 - great 👍 comment.
    North South divide - if it’s not the Politicians, it’s HMRC or Research 🧐 statisticians dividing the country!

     
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    As someone who pays any tax due/ CGT etc, I object to any form of tax evasion. BUT how HMRC unovers this I know not. £17m extra collected seems peanuts v the breadth and depth of the problem. The government could help the law abiding too by preventing overseas buyers etc from hiding property ownership behind offshore companies and avoiding stamp duty. It could also make subletting of properties ( one person taking on theckease/ Council House tenancy and then sub letting individual rooms and pocketing the difference) a criminal offence.

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    Sub letting goes on a lot with council properties here in Norwich, the trick is for husband to leave wife and kids in council house, he then gets a council flat, moves back in with wife and then sublets his council flat, the council housing department know but choose to do nothing.

     
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    Andrew T.
    Spot on!
    The same tactics are used on a National scale hence there are more ‘single’ mothers/fathers in council homes.
    Certain communities (and areas) seem to have more ‘single parents’ accommodation requirements.
    It helps being ‘single’ with children-the whole country then supports them, and their dogs, and illegal migrants who claim to be ‘children’ at the cost of Landlords who first help councils by housing these so called single parents ‘children’, and then by paying high taxes for their high maintenance lifestyles.
    A double whammy, due to unfair tenant friendly laws & No safety net for PRS LL’s.

     
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    Interesting how there is no mention of the hundreds of billions of overpaid tax paid by landlords due to the injustice and discrimination in the way the tax system is rigged against landlords and their families in this country
    For every pound i earn from my other businesses I pay 2.3 times the amount of tax per pound earned from my buy to lets
    Don't you just love the fairness and justice of that
    Perhaps if the Government needs money the could bring in a variable rate of tax based on the colour of peoples skin
    I wonder how that would work out for them ?
    After the principle is the same different tax for different minorities !

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    14 per 100,000 is hardly a huge proportion!

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    14 per 100 000 is 0.00014% of landlords, that's not even a storey worth reporting.

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    I think it is more badly written. My guess is it is 14 per 100,000 of random population not 100.000 landlords.

    If that same 100,000 random population had a landlord rate of 28 per 100,000 then it could be 50% of the landlord population who are at it.. But if the landlord rate is 1,000 per 100,000 then as you say this is very much a none story as it is a mere 1.4% of landlords.

    There is insufficient information to know for certain whether this is something or nothing.

     
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    Chris Clare, if we assume, as you say it is 14 landlords per 100, 000 people, the article is not making any point at all.
    It is like saying 14 cows have marking on them out of 100, 000 livestock.

     
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    So all these nice law abiding landlords will be applying to their local council if their property requires a licence.
    The council should send a list of all their landlords that have applied fr a licence to HMRC to confirm they are declaring their rental income.
    All LL that are prosecuted by their council ( which is very low) should also report them to HMRC and fined under the Proceeds of Crime Act.
    I blame the local council for not going after these rouge landlords and squeezing dry the law abiding
    LL.
    I have a number of LL in my area that have unlicensed properties and have informed the council of this
    but they do not and just ask these LL to apply for a licence, so all these years the have operated under the radar, not disclosing their income.
    The local Council has the power to prosecute these LL, but are too scared

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    I don't think they are scared but not interested, they just want the money from whoever they can get it from.

     
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    Of course they have found a tiny amount of landlords not paying their full tax.
    I'm sure they would find it no different or worse for other businesses.
    But more worrying is the headline grabbing way of announcing it.

    Let's be clear, landlords provide homes for people. This is essential. Yet instead of being congratulated. They are being accused of greed and profiteering. And so are treated with more taxation and regulation than any other business.
    Interesting to note when I put down my profession and income to the bank. I am told it's not a real job and the money I earn is not wages.
    So I can tell the HMRC that I'm unemployed and don't earn money?
    Hmm.. I don't think so

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    It is headline grabbing by the person who wrote this article.

     
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    I don’t think there is any need to notify anyone, the Councils & Revenue are well connected already. The huge numbers of private LL’s who are letting out houses without a License are letting to families who are exempted. It’s so unfair on the
    other half of private LL’s who are required to carry the burden, including thousands of £’s of extra works that other are not require to do, comply with everything and Licensing schemes, its discrimination and plain wrong. All Private LL should be treated equally and governed by the same rules .

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    I am full time LL but lots of my friends have one BTL and they don't declare their incomes. It winds me up.

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    When I started in BTL, I wouldn't have known to submit tax return. In my case I started earning more than 40k and started doing tax returns before becoming a landlord. There are a multitude of people not doing tax returns.
    What the government should be doing is a complete review of taxation to include all forms of employment. They should look at how the Netherlands and other European countries manage their taxation. Such review will never happen as it would be a vote loser.

     
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    Quality reporting! It says Millions (plural) of landlords were drawn out of the shadows and have paid £17m last year. Wow. That’s less than £17 each. I wonder what the HMRC costs were to get this money in!

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    This seems like false reporting and headline seeking as opposed to anything done by HMRC.

     
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