Exclusive: Private landlords evading at least £550 million tax on rental incomes

 

Buy-to-let and other private landlords are evading over half a billion pounds in tax due on their rental income, new figures reveal.

Estimates by HM Revenue & Customs (HMRC) and seen by the investigative website Exaro, reveal that that every year landlords are evading at least £550 million in tax.

This compares with £1.8 billion of tax collected on rental income – meaning more than 23 per cent of tax is being evaded.

John Whiting, director of tax policy at the Chartered Institute of Taxation, said that the widespread tax evasion by landlords was “very significant” which might normally only be expected in the worst “cash businesses”.

“Clearly, rental income is an area where HMRC needs to pay more attention,” he said. “On this scale, it is serious tax evasion.”

The figures are for the 2009-10 tax year, the latest available from HMRC for tax paid on rental income and the amount evaded.

The estimate of £550 million evaded was buried in an HMRC report last month measuring the UK’s “tax gap” of uncollected liabilities. It is nearly four times HMRC’s previous estimate of £142 million of unpaid tax on lettings in a year.

And the amount evaded is likely to be higher because the estimate only covers landlords not filing a tax return – people in staff jobs and pensioners.

HMRC estimates that individuals who file tax returns under the self-assessment system, which covers self-employed people and many high earners, evade a further £400 million of tax in a year. This evasion, however, covers not only lettings, but also other income and investments.

In addition, HMRC sees £550 million as a “lower limit” for evasion by landlords outside self-assessment because third-party data used to compile the estimate may be incomplete.

An HMRC spokesman said: “Lettings are a key area where we are losing money.” HMRC was turning its attention to evasion by buy-to-let and other private landlords, he said. “This is an area where people try to cheat us.”

Private landlords include people who take in lodgers, and owners of properties used for holiday lettings. They also include so-called ‘accidental landlords’, people who are unable or unwilling to sell their properties in a depressed market and turned to letting them until prices rise.

In May, HMRC launched a “taskforce” to target “highest-risk cases” of tax evasion by landlords in London, East Anglia, Leeds, York and certain other towns and cities. These cases included properties owned through offshore arrangements.

However, that initiative was expected to recover only £17 million in unpaid tax.

The spokesman said that a crackdown next year was likely to set out a ‘tax amnesty’, which offers reduced penalties for people who come forward willingly to settle unpaid liabilities.

Recent HMRC amnesties have included savers with offshore accounts.

Tax inspectors are likely to target potential evasion by landlords by using records at the Land Registry to find individuals who own more than one property.

But tax specialists pointed to the difficulty in tracking down undeclared rental income from some lettings, for example where a couple moved in together and let out one of their flats to friends.

The Chartered Institute of Taxation said that while HMRC had become better at identifying people who might be receiving undeclared rental income, it had been a “little behind the curve” with the boom in the buy-to-let market.

HMRC figures show that there are more than 1.9 million private landlords in the UK. But there is no official estimate on how many landlords evade tax.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Purchasing Administrator - Chinese Speaking

£17000 - £24000 per annum: Recruitment Genius: This rapidly growing company is...

Recruitment Genius: Start a Career as a Financial Markets Trader

£40000 - £100000 per annum: Recruitment Genius: Become a professional Trader a...

Recruitment Genius: Software Implementation Consultant

£45000 - £50000 per annum: Recruitment Genius: This software company specialis...

Recruitment Genius: Service Desk Co-ordinator / Client Services Administrator

£22000 - £23000 per annum: Recruitment Genius: The successful applicant will s...

Day In a Page

Giants Club: After wholesale butchery of Idi Amin's regime, Uganda’s giants flourish once again

Uganda's giants are flourishing once again

After the wholesale butchery of Idi Amin's regime, elephant populations are finally recovering
The London: After 350 years, the riddle of Britain's exploding fleet is finally solved

After 350 years, the riddle of Britain's exploding fleet is finally solved

Archaeologists will recover a crucial item from the wreck of the London which could help shed more light on what happened in the vessel's final seconds
Airbus has patented a jet that could fly from London to New York in one hour

Airbus has patented a jet that could fly from London to New York in one hour

The invention involves turbojets and ramjets - a type of jet engine - and a rocket motor
10 best sun creams for kids

10 best sun creams for kids

Protect delicate and sensitive skin with products specially formulated for little ones
Tate Sensorium: New exhibition at Tate Britain invites art lovers to taste, smell and hear art

Tate Sensorium

New exhibition at Tate Britain invites art lovers to taste, smell and hear art
Ashes 2015: Nice guy Steven Finn is making up for lost time – and quickly

Nice guy Finn is making up for lost time – and quickly

He was man-of-the-match in the third Test following his recall to the England side
Ashes 2015: Remember Ashton Agar? The No 11 that nearly toppled England

Remember Ashton Agar?

The No 11 that nearly toppled England
Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

US betrayal of old ally brings limited reward

Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
VIPs gather for opening of second Suez Canal - but doubts linger over security

'A gift from Egypt to the rest of the world'

VIPs gather for opening of second Suez Canal - but is it really needed?
Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
The male menopause and intimations of mortality

Aches, pains and an inkling of mortality

So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

'How can I possibly be on the list with these writers I have idolised?'

Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

Bettany Hughes interview

The historian on how Socrates would have solved Greece's problems
Art of the state: Pyongyang propaganda posters to be exhibited in China

Art of the state

Pyongyang propaganda posters to be exhibited in China
Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

Vegetarian food gets a makeover

Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks