Tenants being quizzed by HMRC

Tenants being quizzed by HMRC

11:32 AM, 18th November 2019, About 5 years ago 11

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Tenants are being quizzed on the tax status of their landlords by HMRC.1 An HMRC fact finding letter goes on to suggest tenants may have to take tax off their own rental payments to ensure the correct tax is paid if their landlord is not resident in the UK and is not registered under the UK’s Non-resident Landlord Scheme (NRL) or face a fine. The Chartered Institute of Taxation (CIOT) is urging any confused or concerned tenant not to ignore the letter and to seek advice if they need it.

The HMRC letters are accompanied by a form which asks the tenants for information about the property, such as whether it is owned by a trust and, if so, the date it was acquired by a trust, and details about the trustees, settlors and beneficiaries. The letter and questionnaire form are designed to gather information to ensure the correct tax is paid.

Brian Slater, Chair of CIOT’s Property Taxes Sub-committee, said: “The letters are likely to confuse tenants when there is no letting agency contracted to let the property and they have to deal with such requests from HMRC themselves.

“It is unlikely the individual tenant would know the answers required of many of the questions on the form unless they are closely connected to the landlord, say a relative. We are concerned that a tenant who receives this letter may be worried about how to respond, particularly if they do not have enough information or knowledge to answer the questions. A tenant may not know that the landlord’s usual place of abode is outside the UK and, even if they do, how will they know about their tax obligations? The wording at the end of the letter about errors and penalties could also alarm the recipient especially if they are not able to answer all the questions.

“HMRC suggest tenants should reply ‘not known’ if they do not know the information for specific questions. There is no legal obligation to respond to the letter and questionnaire but the response will enable HMRC to help the tenant if further action is required or to quickly tell them that no further action is required.”

HMRC have now told the CIOT that they will no longer include in the letters the threat of penalties for tenants who fail to comply, and to amend future iterations of the letter to ask the tenant to show the letter to their tax adviser if they have one.

But the underlying threat of a penalty where tenants make a mistake in their reply to the letter which is not considered by HMRC to be a genuine mistake remains unchanged, and this worries the CIOT. HMRC have now clarified that they will not look to charge a penalty if mistakes have been made in the completion of the form attached to the letter to tenants. The penalties mentioned in the letter to tenants are only relevant to situations where the tenant has chosen not to deduct tax at the right time or neglected to do so.

Brian Slater said: “We are concerned that these letters will land on the doormat of tenants who do not have a tax adviser and in some cases will be unable to pay for tax advice. People who receive the letters should engage with HMRC, completing the questions as far as possible, and not ignore it. We suggest renters read the new advice published on our website.3 If tenants still have concerns or remain confused by HMRC’s letter, then they should seek advice from HMRC’s helpline or tax charities where eligible, or contact a tax adviser.”

1. An example of the letter can be viewed here.

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13:06 PM, 18th November 2019, About 5 years ago

If there is no legal obligation to reply then it is best not to do so. Since when has it been the tenant's obligation to pay his landlord's tax?

Rob Crawford

15:42 PM, 18th November 2019, About 5 years ago

Beggars belief, what sort of private information does HMRC think landlords discuss with their tenants? The risk of miss-information being transferred and HMRC basing decisions on that miss-information is a significant concern!

Monty Bodkin

17:29 PM, 18th November 2019, About 5 years ago

Reply to the comment left by David Price at 18/11/2019 - 13:06
"Since when has it been the tenant's obligation to pay his landlord's tax?"

It's been the case for decades. To my knowledge, it even pre dates the taxation of income from land (non-residents) regs of 1995. Competent letting agents are fully aware of it.

Amusingly, some lefty lawyers have only just cottoned on to this and are suitably mock outraged that tenants should bear any responsibility whatsoever when renting a property.
(Although in practice, HMRC would only go after them if they were complicity involved with the landlord's tax dodging.)

Mark Alexander - Founder of Property118

19:34 PM, 18th November 2019, About 5 years ago

The process for registering as a non-resident landlord is very simple - see https://www.gov.uk/government/publications/non-resident-landlord-application-to-have-uk-rental-income-without-deduction-of-uk-tax-individuals-nrl1

The advantages are being a non-resident landlord are immense from a CGT perspective, so I cannot see any reason for not registering. By doing so, the landlords base cost for UK CGT calculation purposes is automatically uplifted from the original acquisition cost to the Value of the property as of April 2015.

The new changes in regards to not prosecuting tenants for failing to respond are sensible. I agree with CIOT’s concerns and I am pleased they have been addressed by HMRC with common sense.

Appalled Landlord

11:26 AM, 19th November 2019, About 5 years ago

The title and the first paragraph of the discussion between CIOT and HMRC indicate that the letters are only going to a specific group of people - those who are tenants of corporate landlords which are based off-shore.

The sample letter from HMRC confirms this, in the first paragraph:”This property is legally owned by an overseas company called…..”


The first sentence is “We are writing to you as we hold information that says you live in the property shown above.” This implies that HMRC knows the identity of the people living in the property.

But the letter is addressed to Dear Sir or Madam. This means that HMRC doesn’t hold the information it claims to hold. It probably does not even know whether the property is occupied or not.

The letter goes on to say that only tenants who do not pay rent to a letting agent need to deduct tax from the rent.

Luke P

14:10 PM, 19th November 2019, About 5 years ago

Reply to the comment left by Appalled Landlord at 19/11/2019 - 11:26That would seem to make more sense as agents are already *supposed* to (don’t know any that actually do) deduct tax from rent for overseas LLs.

Chris Clare

15:22 PM, 19th November 2019, About 5 years ago

Wow! This looks like a scam waiting to happen.

The scammers get a list of property from Land Registry that is held by an offshore owner and then send letters similar to this with demands for back tax but confirmation that they don't have to pay any rent for a few months to compensate them.

Involving an unitianted tenant in tax collection, is a recipe for disaster IMHO.

Martin Roberts

22:14 PM, 19th November 2019, About 5 years ago

Reply to the comment left by Chris Clare at 19/11/2019 - 15:22
Definately agree with that.

Martin Roberts

22:16 PM, 19th November 2019, About 5 years ago

Phone the HMRC Help Line...

Ever tried getting through?

I have 😢

Michael Barnes

0:10 AM, 23rd November 2019, About 5 years ago

Reply to the comment left by Appalled Landlord at 19/11/2019 - 11:26"But the letter is addressed to Dear Sir or Madam. This means that HMRC doesn’t hold the information it claims to hold."
No, it isn't and no, it doesn't.
It is not addressed to anyone because it is a sample; a real one would be addressed to someone.
"Dear sir/madam" makes it less complicated to auto-populate
the letter with specific data.

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