HMRC told: “Don’t hit landlords with rules change”

Tax experts have warned HMRC not to add to the burden of red tape already falling on landlords.

The Chartered Institute of Taxation says HMRC should improve awareness among the landlords about how and when they need to register with HMRC, rather than push an alternative proposal to change when they register to pay income tax.

Currently, a landlord is required to give notice to HMRC of their liability for Income Tax Self Assessment no more than six months after the end of the tax year in which the landlord became liable to tax. 

This gives HMRC time to issue the taxpayer with a Unique Taxpayer Reference if required, a notice to file a tax return, and time to complete and submit it by the deadline. 

However the government is consulting on bringing forward the point at which new landlords are required to identify themselves to HMRC.

Any change of this kind will impact on landlords, as well as the self-employed, small businesses, accountants, tax agents, legal professionals, bookkeepers, software providers, financial advisers and their clients.

Now the Chartered Institute of Taxation has voiced its disapproval of the proposal, with its director John Cullinane saying: “There is no need for HMRC to inflict significant upheaval on first time landlords with changes to when they register to pay income tax.

“We believe the current Income Tax Self Assessment registration process works well for most taxpayers and there is insufficient evidence to change the current statutory deadline, which is six months after the end of the tax year in which the business starts.

“Using the tax year as a reference point provides consistency, certainty and simplicity for taxpayers and their advisers. It also means that the deadline is the same for everyone, which is fair; there would be significant complexity in monitoring a deadline based on a variable date, i.e. the date the business commenced, not to mention difficulties identifying the precise date on which the business commenced.
 

“HMRC should focus on improving its public education work and their own online guidance, as well as improve the registration processes and joining up IT systems, to make the registration obligation easy to understand and comply with for the self-employed and landlords.

“There are difficulties with the current system which lie mainly with how HMRC process applications, how their IT systems support applications and how taxpayers interact with HMRC’s systems. 

“It can often take a long time, for example, to obtain a Unique Taxpayer Reference (UTR) and in the meantime a taxpayer cannot file returns or pay the tax they owe. This is where we believe HMRC need to focus their attention and resources so that the registration process can work successfully and quickly for every taxpayer.”

Cullinane adds: “We urge HMRC to undertake detailed consultation to assess the impact on other parts of the self assessment regime if any changes are taken forward, such as bringing forward the registration deadline, linking it to the date a business starts trading or even abolishing the legal notification obligation altogether.”

So far there is no final recommendation in the consultation and no date set for any change, should it be agreed by government.

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