Landlord registration plan will drive HMRC investigations

Landlord registration plan will drive HMRC investigations

May 25, 2023

The launch of a landlord database outlined in the Renters Reform Bill will give HMRC unparalleled access to information to launch tax investigations

The database could ‘provide HMRC with a gold mine of information with which to pursue landlords for unpaid tax’, warned BDO.

The Renters (Reform) Bill introduced into Parliament this week, proposes a private rented sector database with details of landlords and their properties let under residential tenancies.

The Bill does not clearly set out that HMRC will get full access to all information submitted as part of the registration process, unlike for the equivalent provisions for the Register of Overseas Entities. However, it is reasonable to assume that the tax authority will make use of the publicly accessible data for compliance activities.

HMRC is keen to ensure landlords declare their rental profits and gains on sale so they pay the tax they owe. It encourages those who have made mistakes to voluntarily correct their position by using the Let Property Campaign, part of HMRC’s digital disclosure service.

Further property data will also become available after the Land Registry implements the new information requirements in the Levelling-up and Regeneration Bill, which are also aimed at extending transparency of property ownership and transactions.

HMRC will combine any new data from the landlord database with information it can already access such as Land Registry records, the Register of Overseas Entities owning UK property and the data in HMRC’s own Connect database, which reportedly holds over 55 billion pieces of data.

Data analysis should help HMRC identify cases for investigation, with a view to charging tax, late payment interest and tax-geared penalties.

Dawn Register, head of tax dispute resolution at BDO said: ‘HMRC already holds significant information on taxpayers’ financial affairs. The introduction of a new private rented sector database will leave few places to hide for landlords who don’t comply.

‘Any landlords who don’t currently pay the right amount of tax would be well advised to bring their UK tax affairs up to date before the register is introduced.

‘In addition to providing peace of mind, making an unprompted disclosure should lead to lower tax-geared penalties for errors, compared to rectifying mistakes after HMRC gets in contact.

‘It will also help to mitigate late payment interest – which is currently at a 14-year high of 6.75% per annum and due to rise to 7% from 31 May.’