The amount of money raised from a campaign encouraging landlords to voluntarily disclose any tax owed on rental properties nearly halved last year, according to an accountancy firm.
HM Revenue and Customs’ let property campaign, encouraging taxpayers to inform it about any tax they owe on their rental properties, received 4,330 disclosures in 2020/21.
This was a 42% decrease on the previous year, according to figures obtained from a freedom of information (FOI) request made by Saffery Champness.
The accountancy firm said the figures also show the tax yield recorded from the initiative nearly halved from more than £34 million in 2019/20 to more than £17 million in 2020/21.
The campaign has given landlords who owe tax the opportunity to come forward voluntarily to put their tax affairs in order. It has been aimed at those who own more than one property, landlords renting to students, people with holiday lets, and those who let multiple occupancy homes.
HMRC knows an increasing amount about taxpayers and their behaviours from a variety of sources and, as Making Tax Digital becomes the default for most taxpayers, its hand will be strengthened significantlyZena Hanks, Saffery Champness
When the launch was unveiled in 2013, it was estimated by HMRC that up to 1.5 million landlords may have underpaid or failed to pay up to £500 million in tax in 2009 to 2010.
The Government said at the time that if landlords did not come forward voluntarily and HMRC found them first, they could face bigger penalties.
Saffery Champness said since opening, the let property disclosure campaign has secured a tax yield of nearly £190 million.
Zena Hanks, a partner in the private wealth team at Saffery Champness, said: “HMRC knows an increasing amount about taxpayers and their behaviours from a variety of sources and, as Making Tax Digital becomes the default for most taxpayers, its hand will be strengthened significantly.”
She continued: “HMRC’s use of technology to home in on suspected unpaid tax is only going to increase, with data and information availability improving all the time, and the direction of travel is likely to be an ever greater expectation, even demand, for tax to be paid in real time…
“Accurate record keeping is essential, as is planning ahead for the cashflow implications of real time payments.
“Landlords should start making plans now as to how they intend to manage the requirements of Making Tax Digital to ensure the switchover is as seamless as possible and to avoid the ire of HMRC.”
An HMRC spokesperson said: “MTD (Making Tax Digital) is fundamental to achieving our goal of building a trusted modern tax system, supporting the digitalisation of the UK and making it easier for businesses to get their tax right and keep track of their finances.
“MTD for income tax will be mandatory from April 2023 for unincorporated businesses and landlords with total business and property income above £10,000 PA (per annum), and we urge landlords to begin keeping digital records now to prepare for MTD for income tax and so they can experience the many benefits of digital record keeping, which include a reduction in errors.”