HMRC estimates that up to 1.5 million landlords in this sector may be underpaying up to £500 million in UK tax every year and has now warned 'come to us, before we come to you'.
This may affect contractors and other individuals who saw the 'buy-to-let' market as a better investment than banks or stocks and shares.
Under HMRC’s new Let Property Campaign, landlords who may owe tax – whether through misunderstanding the rules or deliberate evasion – can come forward and tell HMRC about any unpaid tax on rents, and pay what is owed, including any penalties and interest due.
The campaign, which will run for at least 18 months, is open to all residential property landlords – from those that have multiple properties, to single rentals, and from specialist landlords such as student or workforce rentals, to holiday lettings.
HMRC has said it will be working with a variety of bodies over the next few months to develop tools and guidance to support landlords of all types and help them get their affairs up to date.
Marian Wilson, Head of HMRC Campaigns, said: “All rent from letting out a residential property or holiday home has to be declared for income tax purposes. Telling us is simple and straightforward.
“We appreciate some people will have made honest mistakes, and some may not be fully aware that the rent from a property is taxable, and that is why it always makes sense to talk to us so we can help. It is always cheaper to come forward voluntarily and pay the tax you owe, rather than wait for HMRC to come calling.
“Telling HMRC about your tax liabilities is simple and straightforward, and help, advice and support are available. The message for all landlords owing tax is simple – it is better to come to us before we come to you.”
HMRC will use information it holds about property rental in the UK and abroad, along with information already held on HMRC‘s digital intelligence system Connect, to identify people who have not paid what they owe. For those that fail to come forward, higher penalties – or even criminal prosecution – could follow.
This is the latest in a number of targeted 'carrot and stick' campaigns where HMRC has offer more favourable terms to those who come forward voluntarily in the initial stages of a campaign.
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Susie Hughes © Shout99 2013