Property taxation is under increasing scrutiny
Saffery Champness has revealed that less than 3% of estimated eligible landlords have used HMRC’s Let Property Campaign
HMRC’s Let Property Campaign led to disclosures from less than 3% of the original target, Saffery Champness has reported, following their Freedom of Information request.
“The tax system is becoming more complex and the burden is shifting further towards the taxpayer; this inevitably means individual mistakes and misunderstandings can happen.”
Saffery Champness stated: “In its original announcement for the campaign in 2013, the government estimated that up to 1.5 million landlords had underpaid or failed to pay up to £500m in tax between 2009 and 2010.”
Those who were originally targeted included: specialist landlords who rent to students, people with holiday lets, and those who own more than one property.
“From the outset, the Let Property Campaign was always looking much more widely than just traditional landlords,” said James Hender, head of private wealth at Saffery Champness. “It also targets those who may have become accidental landlords—such as those with holiday lets or multiple occupations.”
“HMRC have been tightening the net on non-compliance and there are increasingly few opportunities for taxpayers to mitigate the risk of an investigation.”
In the 5 years since the beginning of the campaign, 35,099 people made voluntary disclosures to HMRC—this is 2.3% of the individuals originally identified.
Of the estimated £500m in underpaid taxes, the Let Property Campaign recovered approximately 17.1% of the overall—this equates to £85m.
Saffery Champness revealed the following data:
| 2013-14 | 2014-15 | 2015-16 | 2016-17 | 2017-18 | ||
| Disclosures | 886 | 9,486 | 10,040 | 8,080 | 6,607 | |
| Taxpayer offers | 762 | 8,387 | 9,038 | 7,262 | 6,032 | |
| Yield recorded | 0 | £17,633,534 | £25,207,873 | £21,392,426 | £21,198,613 |
“There seems to be a pattern emerging of HMRC targeting other sources of tax revenues, with property being an asset that they could look to levy additional taxes on. This is already in motion, with a raft of tax changes set to hit second homeowners and accidental landlords over the next year or so.”
Hender added: “The tax system is becoming more complex and the burden is shifting further towards the taxpayer; this inevitably means individual mistakes and misunderstandings can happen. Looking at the data from the FOI, of the large number of tax payers who stated that they had either failed to notify HMRC of their original liabilities or hadn’t taken reasonable care, many would likely have been unaware that they owed anything at all.”
“The difficulty with bringing in new property taxes is that it is political dynamite and any significant reform could provoke a backlash from property owners of all stripes.”
More specifically, takeaway points for those who have disclosed to HMRC (according to the Saffery Champness information request) are as follows:
- Failure to notify HMRC: 5,019
- Taken reasonable care: 5,793
- Not taken reasonable care: 971
- Deliberately misled HMRC: 81
“According to HMRC’s estimates, there are clearly many more landlords who have additional tax to pay but have yet to come forward,” Hender continued. “If this is the case, then these people would be well-advised to contact the taxman sooner rather than later. HMRC have been tightening the net on non-compliance and there are increasingly few opportunities for taxpayers to mitigate the risk of an investigation.”
“You only need to look at countries such as France and the US to see that, in comparison, UK property is a relatively lightly taxed asset.”
He concluded: “This campaign is one of the few that remains open but, with the Common Reporting Standard online and the Failure to Correct penalty system in place (both of which will affect owners of properties overseas) it is likely to remain that way for only so long.”
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Lucy Brennan, partner at Saffery Champness, added: “We are picking up signals from the Treasury that their long-term forecasting for tax revenues shows that some of the biggest money spinners for the last century, including tobacco, alcohol, and fuel duty, are due to changing lifestyle habits.
“There seems to be a pattern emerging of HMRC targeting other sources of tax revenues, with property being an asset that they could look to levy additional taxes on. This is already in motion, with a raft of tax changes set to hit second homeowners and accidental landlords over the next year or so.”
Brennan concluded: “You only need to look at countries such as France and the US to see that, in comparison, UK property is a relatively lightly taxed asset. The difficulty with bringing in new property taxes is that it is political dynamite and any significant reform could provoke a backlash from property owners of all stripes.”
