At the time of its inception, the government believed that some 900,000 landlords had failed to declare their rental income to HMRC. As a measure of the scale of the problem HMRC launched the let property campaign in an effort to clamp down on perceived tax avoidance by giving landlords the opportunity to make a full and complete disclosure of their undeclared rental income.
Figures obtained by Saffery Champness under a Freedom of Information Request indicate that a little over 35,000 people had made disclosures, with the highest number of disclosures peaking in 2015/16 at 10,040.
HMRC reported that in the five years before 5 April 2018, a total of £85,432,446 of ‘yield’ was generated by these disclosures. A mere fraction of the £500 million pounds of underpaid taxes that the Revenue estimated in 2013 when the campaign was launched. Furthermore, when you consider that yield also includes penalties and late payment interest, it is quite possible that this figure actually includes tax of, say, £50 million – some 10% of the total taxes that HMRC estimated were underpaid.
It should also be noted that these figures only include letting income under the HMRC let property campaign and do not include tax revenue yielded from serious fraud investigations (under code of practice 9) or in consequence of ordinary enquiries into taxpayers’ affairs. Therefore, the total yield from all undisclosed letting income is likely to be significantly higher than these figures indicate.
Regardless of debates around the exact amount of tax which has been collected across the Revenue, what is clear is that a significant number of landlords are yet to declare their rental income to HMRC.
The existence of such a significant amount of undeclared income is not necessarily indicative of deliberate behaviour. Many taxpayers will be unaware of the reporting obligations, believe that they do not earn enough to be within the scope of tax, or may simply be subletting rooms in their current residence in the belief that the income is not subject to taxation.
The HMRC let property campaign will remain open for the foreseeable future. HMRC continue to actively write directly to individuals who they believe should make a disclosure. However, taxpayers who believe that they may have undisclosed rental income should consider approaching HMRC directly, rather than waiting to be contacted. By proactively engaging in a settlement with HMRC taxpayers can benefit from reduced penalties and gain the piece of mind that their historic affairs have been rectified.