A campaign by HM Revenue & Customs to encourage buy to let investors to ‘fess up’ to their unpaid tax has produced over 16,000 volunteering to repay what they owe.
An analysis of HMRC data by consumer group Which? found that in 2018-19 the number of landlords who admitted underpaying tax on their rental income rose 145 per cent compared with the previous year.
“In 2018-19, more than 16,000 landlords voluntarily told HM Revenue & Customs they had underpaid tax, after receiving a letter encouraging them to come clean” says Which?
Only 6,600 were recorded the previous year.
Last summer HMRC sent tens of thousands of letters to investors it suspected of avoiding or underpaying tax, as part of its Let Property Campaign: most of those targeted appeared to be landlords with just one or two properties to let.
The letters gave them a 30 day window to contact HMRC and then three months to repay owed tax. The letters also made clear that, under provisions of the Let Property Campaign dating back to 2013, those who voluntarily disclosed underpaid or unpaid tax would receive “generally favourable terms”.
However, those who failed to play ball with HMRC faced investigation, much higher penalties and the possibility of a criminal prosecution.
Which? says landlords who voluntarily disclose unpaid tax will face penalties of up to 20 per cent (plus tax or interest) – this is significantly lower than the 200 per cent maximum fine that can be imposed after a HMRC investigation.
In total, HMRC recouped £42m from the scheme in 2018-19, double the £21m recorded in 2017-18.