Yorkshire landlords should scrutinise their tax return expense claims as the property market in Leeds and York is being targeted by a new HMRC taskforce aiming to recover millions of pounds in unpaid revenue, advises a leading law firm.
The taskforce, which covers Leeds and York as well as East Anglia, London, Leicester, Nottingham, Lincoln, Durham and Sunderland, is expected to recover more than £17m from tax dodgers and will visit traders to examine their records and carry out investigations.
HMRC Exchequer secretary David Gauke said: “We have made it clear that we will not tolerate tax evasion – everyone needs to pay the taxes they owe in full.
“We are determined to crack down on the minority who choose to break the rules. It is not fair, that at a time when most hard-working people are paying the right taxes, others are trying to get out of paying what they should.”
Head of tax litigation and disputes at law firm DWF, which has a base in Leeds, Andy Brown, believes HMRC may be targeting the county because of the high proportion of towns and cities that have a large student population and may have a higher risk of tax evasion.
“It’s not completely clear why HMRC has targeted landlords in Yorkshire specifically, although it could be down to the fact that student-orientated towns and cities may have a higher risk of tax evasion.
“While the taskforces are intended to tackle evasion, avoidance and fraud, some landlords who are genuinely unclear of the law regarding property income will inevitably fall within these categories.
“However, as the saying goes: ‘Ignorance of the law excuses no man,’ ” he said.
Landlords who own rental properties are obliged to pay tax on any income or profit they earn from it after making allowable deductions – with the danger being that small scale landlords who may receive their rental directly into their bank account do not pay tax, he said.
“Residential landlords need to make sure that they complete a self-assessment tax return, which includes a special section for landlords (headed ‘Land and Property’), at the end of each tax year,” said Mr Brown.
“They should take time to make sure they have filled it in correctly, as it is common to make mistakes such as entering the rental income into the wrong section.
“The rental market is one that HMRC has found deserving of extra scrutiny.
“So, landlords should assume that their returns will receive special attention, and make sure they are confident in the expenses they intend to offset.”