According to the Telegraph today lettings agents could soon be forced to hand over the names and addresses of all landlords on their books, past and present.
The move would make it easier to identify buy-to-let investors who are avoiding paying tax on their rental income or capital gains when they sell a property.
We might assume that those landlords who fail to declare their rental income probably arrange private lettings. Are there really many people who use a lettings agent and then omit to declare the rental income on their tax returns?
That's actually exactly the reason for the prospective change in the law. Lettings agents have long been exposed to prospective requests by HMRC to provide statements showing:
- all monies received on behalf of landlords;
- the names and addresses of each landlord; and
- a declaration as to whether every such person is of full age, UK resident or incapacitated.
However the rules currently state that any such requests from HMRC can only cover the last 3 years.
So the reported change (to s13 TMA 1970) would extend this facility to:
- go back more than 3 years; and
- to cover details of landlords who have used the agent to source tenants even where the landlord collects their own rents.
Landlords who have not been declaring their taxable rental income should take professional advice now. Remember that tax is only charged on the net taxable rent. This means rental income less all deductible expenses such as:
- buildings and contents insurance
- maintenance and repairs (but not improvements)
- accountant/tax advisers' fees
- letting agent's fees
- legal fees for lets of a year or less, or for renewing a lease for less than 50 years
- interest on property loans - mortgages
- utility bills (like gas, water, electricity)
- rent, ground rent, service charges
- Council Tax
- services you pay for, like cleaning or gardening
- other direct costs of letting the property, like phone calls, stationery, advertising
Edit: There's time to get your affairs in order before HMRC will have the power to obtain the additional information they require from letting agents. The press reports relate to a new consultation document published by HMRC on 9 July: Bulk and specialist information powers
Although this is the TaxBuzz blog I do occasionally feel it appropriate to remind readers that you can find expert tax advisers across the UK from within the Tax Advice Network. And many of them have the expertise you need to help decide how best to approach HMRC if you have not yet been paying all the tax due on your net taxable rental income. Simply click here for a list and choose whoever best suits you.