HMRC is targeting residential landlords with ‘nudge letters’

HMRC is targeting residential landlords with ‘nudge letters’

10:57 AM, 14th November 2022, About 3 weeks ago 19

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HMRC is targeting residential landlords in its latest ‘nudge campaign’ that it suspects are not declaring their full rental income, warns tax advisers Kreston Reeves.

The campaign comes in advance of Jeremy Hunt’s first Autumn Statement and rumours of a further attack on residential landlords with higher rates of Capital Gains Tax (CGT) on property disposals and higher rates of National Insurance.

George Guilherme-Fryer, a director in the firm’s tax disputes team, said: “These nudge letters are widely targeted at individuals or businesses based on information received, primarily from other governmental departments, banks or, in this case, the tenancy deposit scheme.

“Landlords in England are limited to taking a five weeks’ deposit for new and renewed tenancies with rent under £50,000 a year or up to six weeks if the annual rent is £50,000 or more.

“As most landlords take the maximum deposit, it is not difficult for HMRC to calculate the expected rental income which should be included in a tax return.”

‘HMRC will assume an approximate rental income’

He added: “For example, if the deposit held with the tenancy deposit scheme is £1,000, five weeks of £200, then HMRC will assume an approximate rental income of £10,400 annually, or £200 per week.

“These latest nudge letters tend to include a statement saying that HMRC has received relevant information, suggesting the landlord review their tax position, and including a suspiciously simple certificate of tax position to be completed and returned.”

Mr Guilherme-Fryer highlights that the letter will not take into account vacant periods or reductions in rent and will often mean that no action is required.

No obligation for a landlord to respond

However, he says that there is no obligation for a landlord to respond or to sign the certificate of tax position.

Mr Guilherme-Fryer warns: “But landlords are advised to review their tax position if such a letter is received to identify if any disclosures are needed.

“If they are ignored and it is later found that tax is due, it may lead to an investigation and potentially a criminal prosecution.”



Comments

Katy Ann

14:35 PM, 19th November 2022, About 2 weeks ago

Reply to the comment left by IS at 15/11/2022 - 17:47
No.

John

18:20 PM, 19th November 2022, About 2 weeks ago

Reply to the comment left by PH at 19/11/2022 - 14:22When you fill in the form you normally get a tax calculation based on the figures you have used. You then submit the form and they will acknowledge receipt by e mail.
If you are owed a refund you will get this within a few weeks.
If you owe tax you can either pay in full online or depending on when you submit the form you can spread the payments until 31st January the following year.

Simon Baldry

20:14 PM, 19th November 2022, About 2 weeks ago

As the owner of a LA we are regularly asked to supply contact details, rent and deposit info for our landlord clients by HMRC.

ALAN POWELL

11:37 AM, 20th November 2022, About 2 weeks ago

I have received one of these letters and called HMRC. Informed them that rent covered by tenancy deposit scheme was double the figure that I declared as the property concerned was jointly owned. My returns and those of my wife always show that let properties are jointly owned. The lady at HMRC gave me the impression that the joint ownership factor had not been considered or had even occurred to them. Shooting from the hip it seems!!

My fear was that if I did not respond an enquiry might be opened - based on flawed data.

Otto

12:06 PM, 24th November 2022, About 2 weeks ago

Reply to the comment left by ALAN POWELL at 20/11/2022 - 11:37
Me 2, joint ownership is ignored.

Otto

12:08 PM, 24th November 2022, About 2 weeks ago

Reply to the comment left by IS at 15/11/2022 - 17:47
They have overreaching powers however this kind of fishing is not part of it.

Otto

12:13 PM, 24th November 2022, About 2 weeks ago

Reply to the comment left by david porter at 14/11/2022 - 17:20
You must work for them. You mean not following the rules of which there are many, toooo many. Like taxing you before all expenses are deducted against GAAP ie mortgage relief.

Otto

12:18 PM, 24th November 2022, About 2 weeks ago

Reply to the comment left by Anne Nixon at 19/11/2022 - 10:52
You are still liable to HMRC even if you use accountants. If it goes wrong you have to sort it out with them after or call them as party to proceedings. I used an accountant for the year in question who was not interested. The "assumption" that the multiple of the deposit equates to the declarable income is an obvious error or logic but maybe they just don't care.

Otto

12:28 PM, 24th November 2022, About 2 weeks ago

Reply to the comment left by Anna Zanesco 🎪 at 16/11/2022 - 10:06
Yep, The problem is that people leave early, stop paying, there are accruals and adjustment form previous years, deposits may not be released when the tenant stops paying, moves our or abandons the property and date misnomers due to delayed and prolonged court cases. Multiple of deposits is simplistic but they are not after accuracy of income they are harassing landlords in a broad sweep without any true and substantive evidence. Innocent until proven guilt? Reasonable suspicion?

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