HMRC “Tackling the Hidden Economy”

HMRC “Tackling the Hidden Economy”

9:26 AM, 27th December 2017, About 6 years ago 4

Text Size

The HMRC consultation titled “Tackling the Hidden Economy” has identified HMOs and selective licensing in the private rental sector as an option for developing tax-registration checks.

The consultation proposes to tackle different areas of the hidden (non tax paying) economy by making access to licences needed to trade conditional on tax compliance, known as ‘conditionality’.

Click Here to see the full  HMRC paper.

HMRC wish to target Licences issued under the Housing Act 2004 as the government believes they
may be suitable for conditionality.

Selective licensing for private rented properties:

Part 3 of the Housing Act 2004 (the Act) sets out a scheme for licensing private rented properties in a local authority area in England and Wales. Under section 80 of the Act, a local authority can introduce selective licensing of privately rented homes in order to tackle problems in their areas (or any part or parts of them) caused by low housing demand or significant anti-social behaviour. In 2015, DCLG introduced further grounds for implementing selective licensing schemes: poor property conditions, high levels of migration, high levels of deprivation and high crime.

Where a selective licensing designation is made it applies to privately rented property in the are a, and all properties in the private rented sector are required to be licensed by the local housing authority (subject to certain exemptions). Local authorities in England are required to obtain confirmation from the Secretary of State for any selective licensing scheme which would cover more than 20% of their geographical area or would affect more than 20% of privately rented homes in the local authority area.

Houses in multiple occupation (HMO) licences:

A house in multiple occupancy (HMO) is a property rented out by at least three people who are not from one ‘household’ e.g. a family, but share facilities like the bathroom and kitchen. Licences are required for those who rent large HMOs. There are approximately 510,000 HMOs in England and approximately 64,000 of these are currently required to be licensed. The Department for Communities and Local Government (DCLG) recently consulted on changing the definition of mandatory licensing which would bring a further 160,000 HMOs in scope.

Local authorities have the power to introduce additional licensing schemes, which would capture further
HMOs. These licences must be renewed every 5 years.

The Paper goes on to say:

“The government values the private rented sector and wants to see a strong, healthy and vibrant market, which meets housing needs in a professional way.

This includes ensuring that landlords are reporting and paying the tax they owe.

To support this aim, HMRC is increasing its targeted compliance activity across the private rental sector through taskforce activity. It is also encouraging those who have been non-compliant to come forward through activities such as the Let Property Campaign

Applying conditionality to HMO licences could support existing HMRC compliance activity by helping and encouraging more landlords to ensure they are compliant with tax laws before renting out properties.

Similarly, there may be potential for tax-registration checks to be incorporated into selective licensing schemes where appropriate and proportionate.”

Share This Article


John Mcgowan

22:17 PM, 28th December 2017, About 6 years ago

How is it that there was no consultation before George Osbornes clause 24 tax grab which selectively and deliberately taxes landlords on their turnover unlike any other business profession in the UK ? Oh I know because they can get away with this disgraceful scam without the public either knowing or caring despite it now leading to significant increases in homelessness!


11:43 AM, 30th December 2017, About 6 years ago

I hope they are going to look at all areas of the ecconomy as when I rented out a flat in October I had several people admit they had untaxed income and as a result would not have passed referencing.
One guy told me he was employed as a roofer and earned £650 cash every week so it would seem that both he and his boss were not paying the correct amount of Tax. There were two other guys that came both working full time one of whom also had a part time job paid cash and the other also ran a business that he did not declare the income from.


12:51 PM, 30th December 2017, About 6 years ago

Brighton and Hove City Council are bringing in further additional licensing schemes across more wards, replacing the existing additional licensing schemes and bringing in selective licensing schemes for all privately rented properties not caught under the other schemes. Even though the existing schemes are questionable on how they have been managed and the extreme discrepancy in standards between inspectors.

The whole licensing consultation process for the new schemes has bee a farce with with leading questions on door to door questionnaires, the people questioned were invariably tenants in HMO properties with multiple questionnaires filled out per property. The landlords are not living in the area so had little input. The results from the consultation were then questionably interpreted. With the whole process appearing fated from the start ie the council has been preparing to introduce the schemes before the consultation process came back.

The main Landlord bodies both the NLA and RLA did not turn up to any meetings leaving the Southern Landlord Association to try and fight the council alone.

Us as landlords need to learn to stand together and fight back against the constant onslaught against us. licensing schemes are simply a means to raise revenue so the cost of environmental health inspectors is off set against private rented licensing costs instead of the councils own pocket even though a substantial amount of issues they are involved in are caused by social housing and disrepair from owner occupiers.

We have questioned the council to use private RICS chartered surveyors for licensing inspections to maintain inspection standards, this has been turned down at present. This is another sign the schemes are just used to fund existing staff and fund a councils inefficiency that will in the end put more costs back on the tenants.

Michael Bond

18:41 PM, 31st December 2017, About 6 years ago

It seems that Local Authorities are now to become narks for the taxman. They find it hard enough to their own business competently. How does anyone think that they could act as a efficient agent for HMRC? Also LAs are well famous for leaking personal and confidential information. What is there to suggest they would not broadcast widely with any personal financial/tax information they might acquire, if only by mistake?

Will similar requirements be imposed on those who provide Council and housing association accommodation? Is there any reason to suppose that they don't also have tenants living on the black economy?

Tim's complaints about lack of support from NLA in fighting a selective licensing proposal from Brighton & Hove Council are misplaced. I am chairman of the Dorset Branch of the NLA. About a year ago we were faced with a proposal to introduce selective licensing in a specified area of Bournemouth. This has been postponed indefinitely -- which we believe really means abandoned. We had help and advice from NLA head office in London, but we did most of the leg work, including coordinated responses to the consultation and lobbying of councillors. You cannot expect your battles to be fought for you. But NLA, and no doubt RLA, will give help and specialist advice. Whether SLA has the resources to do that I don't know. But get together and make sure you have an active local landlords' organisation affiliated to one of the national organisations.. Incidentally we were told of a similar consultation elsewhere in the country at the end of which the relevant local authority announced that it had received about 20 responses in favour of its proposals and only one against them, ignoring that that response was from NLA which represents about 70,000 landlords across the country.

HMRC seems to have forgotten the fact of life that if you reduce tax rates receipts go up -- although not necessarily to the extent they did after the 1979 election when Mrs Thatcher reduced the marginal rate of income tax from 98% (yes, really) to 83%, to 60%, and then to 40%.

Leave Comments

In order to post comments you will need to Sign In or Sign Up for a FREE Membership


Don't have an account? Sign Up

Landlord Tax Planning Book Now