HMRC clawed back £33m in unpaid tax from landlords

HMRC targeted almost 5,500 landlords last year and recovered £33m in unpaid tax, as the authority re-prioritised its activities following the end of covid restrictions.

Max Austin, Reporter, Accountancy Daily

The number of landlords being caught and fined for underpaying income tax continued to increase year-on-year, with more than £33m being recovered in 2022/23, up 73% from £19.3m in 2021/22, largely as a result of HMRC stopping activity during the pandemic.

According to RSM UK, the tax burden on landlords is estimated to reach £8.3bn this year, up from £7bn collected by HMRC in 2019-20 – due mostly to frozen tax allowances and the removal of reliefs.

In total, the value of penalties issued hit £2m, an increase of 53% from £1.3m the year before, according to HMRC data, but still down on pre-pandemic levels of £2.5m.

Last year, 5,429 landlords failed to declare income tax to the tax authority, an increase of 83% from the previous year, which stood at 2,953.

Under the Let Property Campaign, which was introduced in 2013, landlords have the opportunity to disclose irregularities associated with their buy to let rental profits.

The campaign is open to all residential property landlords including those that have multiple properties, to single rentals, and from specialist landlords such as student or workforce rentals, to holiday lettings.

During the pandemic, HMRC transferred staff from the compliance department into teams working on programmes such as the coronavirus job retention scheme (CJRS), self-employment income support scheme (SEISS) and eat out to help out.

The landlord campaign, which was initially designed to target the 1.5m landlords HMRC thought were underpaying tax on rental income, was originally going to run for 18 months, but the campaign has remained open for 10 years.

Using the scheme, HMRC can claw back up to 20 years of underpaid tax, and fine landlords up to 100% of any outstanding tax, or 200% for cash held offshore.

An HMRC spokesperson said: ‘The Let Property Campaign is an opportunity for landlords who owe tax through letting out residential property, in the UK or abroad, to get up to date with their tax affairs in a straightforward way and take advantage of the best possible terms.

‘During the covid-19 pandemic, resources were moved to support the wider government’s priorities at the time, which resulted in a temporary reduction in the number of disclosures made.

‘As a direct result, the numbers of let property disclosures and those found to have underpaid on their rental income reduced during 2021/22.

‘Let property disclosures and those found to have underpaid rental income have now increased due to the end of covid-19 restrictions and the recommencement of our compliance activities. With the increase in disclosures being made in 2022/23 it has increased the tax yield generated.’