Million landlords face a tax investigation

According to the latest report in the Mail almost a million landlords could face a tax investigation because the have failed to register with HM Revenue & Customs (HMRC)

Landlords  are not registering for tax
This is based on the fact that  the number of landlords now equals 1.4 million whilst only 500,000 have registered with HMRC.  In theory there are over 900,000 landlords that could be quizzed by the HMRC about their buy-to-let property and tax affairs.   For many landlords historically there appeared no need to register with HMRC because not making rental profits.  The difficulty for many landlords is that since interest rates have fallen to the floor is that they are now making significant rental profits.  HMRC are aware of this and could now be pressing to find un paid taxes.  Accountancy, firms have estimated that unpaid taxes could equal in the order of £550 million.

Tax advice
Landlords need to be aware that where they do make a rental loss that they can off set this against future rental profits.  Whilst clearly HMRC have limited resources and will not be able to launch investigations against every unregistered landlord.  At the same time there is an increasing risk that landlords who do not declare their rental income will be targeted & investigated.  Chris Horne a serial landlord and Editor of Property Hawk a leading website for landlords comments:

"The nature of many landlords is that start off with one property which makes no money so they don't feel they need to notify HMRC.  Over the years that 1 property perhaps builds into a portfolio of 5 or maybe 10 properties.  Perhaps they have sold a property along the way to allow them to build up their rental business and purchase more investment properties.  Over time they have a significant rental business but have not declared it to the tax authorities.  Landlords in this situation, feel trapped because they are worried about the fact they have not registered and how the tax authorities will deal with them.  I know this because it is exactly what happened to me.

Landlords are therefore always best to disclose their income from the outset to avoid this happening.  If this situation has arisen then they should seek professional tax advice but a full disclosure to the tax authorities will often be treated more leniently than been discouvered as part of an investigation."

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