The Risk and Intelligence Service (RIS) within HM Revenue & Customs (HMRC) has been writing to letting agents in recent weeks, to warn them that a statutory notice is going to be issued this month for details of rents collected on behalf of landlords.
The letters, issued by the HMRC Centre for National Information, Ground Floor, Government Buildings, Ty Glas, Llanishen, Cardiff read as follows:
I will soon be sending you a statutory notice under paragraph 18 of Schedule 23 to the Finance Act 2011 requiring you to send me a return of information.
I believe your business may involve acting as a letting agent on behalf of property landlords. I am writing to let you know that in March 2014 I will be sending you a notice under the above legislation. That notice will require you to send me a return of gross rents that you have collected in the year ended 5 April 2013 on behalf of property landlords.
What information will I require from you?
We need to know about rents that you have collected from tenants on behalf of landlords who have used your letting agency services in the year ended 5 April 2013. We will use that information to check that the landlords declare the rents on their returns. To seek this information I will be sending you a statutory information notice in March 2014. The notice will require your return within 60 days of the date on the notice. This is not a check of your tax affairs. We will only use this information to check that the landlords have declared their rental income correctly.
I am writing to you now to give you advance notification of our notice. We also want to check that you handle the sort of rents about which we need to know so we can avoid sending you a notice if one is not appropriate. Therefore please complete the enclosed questionnaire and return it to me by 17 March 2014.
The notice I plan to send you will require a return of gross rents collected in the year ended 5 April 2013 on behalf of property landlords for whom you acted as agent. In respect of each landlord you will need to give me the following particulars in your return:
- the name and address of the landlord for whom the rents were collected;
- the amount of the total gross rent collected from the tenant for the landlord for the year ended 5 April 2013;
- the address of the let property to which the rents relate.
Full Management or Lettings Only Services
If you have collected rents for any landlords on a ‘full management’ basis you will need to include the relevant details on your return. If you have collected rents on a more limited basis (for example collecting the first month’s rent as part of a ‘lettings only’ tenant-finding service) you will also need to include these details on your return. In both cases you should show on your return the gross amount of rent obtained from the tenant. Please disregard any other fees you received for these services – you should only show on your return the gross amount of rent received from the tenant in the tax year.
Landlords living outside the UK
In addition to any landlords based in the UK you will also need to include on your return any landlords living abroad for whom you collected rents in the year ended 5 April 2013.
Making your return
If your questionnaire confirms that you do act as a letting agent, or if we do not receive your questionnaire, we will send you a notice in March 2014. After you receive your notice you will need to send us your return template from the HM Revenue & Customs (HMRC) website at: http://www.hmrc.gov.uk/statutory-notices/rent.htm
Your notice will include further guidance on making your return.
If you did not act as a letting agent
If you did not act as a letting agent in the year ended 5 April 2013 then I am sorry to have written to you by mistake; please disregard the rest of this letter. However please complete the enclosed questionnaire and return it to me so we do not send you a notice.
Data Protection Act
Once you receive your notice you will be required by law to provide this information. Under these circumstances the information becomes exempt under the non-disclosure requirements of the Data Protection Act 1998 under Section 35(1) of that act. Therefore you will be able to disclose the information to me without breaching the Data Protection Act.
Costs that you incur in providing your return
The notice that I intend to send you will place a legal obligation to provide your return. Therefore any costs that you incur in providing your return are regarded as normal costs of complying with your legal obligations under tax law. Unfortunately HMRC cannot reimburse businesses for such costs.
Penalties for failing to make a return
There are penalties for failing to make a return. Failures can attract an initial penalty of £300 plus up to £60 per day for a continuing failure.
What to do next
- Please do not send me your return yet. You are not obliged to make your return until you receive a notice from me. I plan to send you a notice in March 2014.
- Please complete the questionnaire below and return it to me by 17 March 2014. The information on the questionnaire will help me to ensure that your notice is accurate and that we do not ask you for information that you do not hold.
- Please ring us on 03000 582413 if you need further guidance.
Business Unit Head
Let Property Campaign
HMRC estimates that up to 1.5m landlords may be underpaying £500m in tax every year and has launched the Let Property Campaign to encourage voluntary disclosures of undeclared rental income from landlords. Full details on the Campaign can be accessed here http://abytx.co/1mev5wq
As the letter issued by RIS highlights, HMRC intends to use the information collected to check that the landlords have declared their rental income. No doubt this information will be analysed and risk assessed alongside the details HMRC already receives from the Land Registry regarding property ownership and transactions. HMRC also uses voters list entries to identify multiple occupancy by unrelated persons in a property and housing benefit payment details to track down landlords who are failing to declare their true rental income.
Callers to our tax helplines, with foreign villas and apartments to let, have been in contact to say they have been identified from adverts placed on specialist holiday websites and have asked for assistance in making voluntary disclosures under the terms of the Campaign.
Author: Guy Smith, Senior Tax Consultant on the ReSource Tax & VAT Consultancy Team.
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