Thousands of landlords in just one London borough are believed to have avoided paying millions of pounds in tax, prompting suggestions that there could be up to £200m in unpaid levies across the capital.
Newham Council said up to 13,000 landlords had failed to accurately declare the income they receive from renting out properties – over half of the 27,000 landlords registered as operating in the borough.
The council said the 13,000 had not registered for tax self-assessment, which is a requirement for landlords receiving at least £2,500 a year in rent.
It said a similar trend in the rest of London would mean the taxpayer is losing out on almost £200m in unpaid revenue. Applied across the country, the figure is likely to be much higher.
Newham Council was the first to introduce a compulsory landlord licensing scheme in 2013. It has now shared its register with HM Revenue and Customs (HMRC) in an attempt to uncover landlords that are not paying their fair share of tax.
In a letter sent to Chancellor Philip Hammond, Sir Robin Wales, Mayor of Newham, wrote: “It is our understanding that, to date, up to 13,000 Newham landlords are of interest to HMRC, where there are discrepancies between declared income and our records, with potentially significant financial implication for the exchequer.”
“Our core grant funding has halved since 2010-11, that’s less money for our schools, less money for social care, and less money for housing. I urge you to assess the additional benefits of Newham’s licensing scheme in assisting the exchequer to address tax evasion by landlords.”
The council is currently in a dispute with the Government over its landlord licensing scheme after ministers ruled that compulsory registration results in “unnecessary costs for reputable landlords”.
“The vast majority of landlords provide a good service and the Government does not believe it is right to impose unnecessary additional costs on them, or their tenants”, Brandon Lewis, the then Housing Minister, said in 2015. “Such an approach is disproportionate and unfairly penalises good landlords.”
Councils, however, say licensing is vital to allowing them to effectively clamp down on rogue landlords.
Newham says it has banned 28 landlords, issued 2,170 notices to improve properties and recovered £2.6m in unpaid council tax.
HMRC said it did not recognise the 13,000 figure.
A spokesperson said: "We are working with the London Borough of Newham as part of our UK wide Let Property Campaign.
"This work has generated £115m in additional and previously unpaid tax and interest.”
The Independent revealed last week that almost a third of privately rented homes do not meet the basic government health and safety standard, while close to a fifth contain the most dangerous type of hazard.
A spokesperson for the Residential Landlords Association said: “We condemn any landlord that does not pay the tax that they are legally obliged to.”
Join our new commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies