The tax man wants to target expat landlords with a new crackdown on avoidance.
Revealing a new policy to shrink the black economy, HM Revenue & Customs has made clear landlords are in their cross hairs.
The plan is to make granting property licenses conditional on landlords proving they are registered with HMRC and are paying the right amount of tax.
HMRC argues this will nip avoidance in the bud and plug some of the £3.5 billion tax gap at the same time.
In a new consultation document Tackling the hidden economy: public sector licensing, HMRC suggests private landlords seeking licences for houses in multiple occupation (HMOs) or any selective licensing homes should come under the new regime.
Thousands of properties targeted
The tax authority points out that England has more than 510,000 HMOs and 64,000 need a licence.
But the Department of Communities and Local Government plans to require thousands more homes to register for a licence, which could mean an extra 160,000 HMOs coming under HMRC scrutiny.
HMRC is also eying thousands of homes that come under selective licenses issued by councils.
“Few businesses can exist in a vacuum: most require services from other businesses, or approvals and services from part of local or national government,” says the HMRC consultation documents.
“The proposals included in this consultation would integrate tax registration checks into some of these existing approvals to encourage more customers to engage with the tax system at the right time,” the consultation explained.
Tax avoidance uncovered
“These proposals would support a key aim of our strategy: to crack down on the hidden economy by preventing people from entering it in the first place. They would promote tax registration, helping customers to better understand their obligations to register for tax and the simple steps they need to take to declare their income to HMRC.”
The consultation ends on March 2, 2018.
The tax move follows housing officers at Newham, East London, uncovering more than 100 landlords applying for housing licences who were found to be avoiding tax after checks with HMRC.
If the new proposals are adopted, expat landlords would have to register their renal business with HMO before they could legally rent a home.