16:46 PM, 26th January 2012, About 10 years ago
The tax man is tracking down landlords with undeclared rental income by demanding lists of property clients from letting agents.
Letting agents all over the UK are having to submit client lists with names and addresses of landlords and their rental properties to HM Revenue and Customs.
For many letting agents, this is the first time HMRC has asked for the information.
The aim is for HMRC to build a hit list of landlords and their properties to compare against tax returns.
The crack down is part of an HMRC campaign to tackle tax evasion.
Dedicated landlord tax units have already been set up in some tax offices, like Northampton and Edinburgh, while a team of tax inspectors are investigating property investors in North Wales and the North West.
Other intelligence gathering for HMRC property tax inspectors includes crosschecking council housing benefit payments against Land Registry title records and electoral rolls to identify houses in multiple occupation.
Land Registry records also reveal property sales for capital gains tax inquiries.
Hundreds of landlords have failed to declare their property income to HMRC in the mistaken belief that if they have no obligation to do so if they do not make a profit.
However, tax rules say landlords must declare rental income by October 5 following the tax year when the earnings started.
A new tax harsher tax penalty regime from HMRC means a COP9 statement will be issued if fraud is suspected.
In simple terms, tax fraud can mean gaining a financial advantage by deception – and this can include failing to notify – which is why Tottenham Hotspur manager Harry Redknapp is in court on tax charges.
HMRC have announced where unfair and deliberate tax avoidance is involved, a COP9 inquiry will be launched.
The inquiry includes a ‘contractual disclosure facility’ or CDF which is a declaration of admitting any tax evasion in return for avoiding criminal prosecution.
Landlords should take professional advice from an accountant experienced in tax investigations as signing the CDF is a tacit admission of tax evasion.
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