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Upcoming Landlord Database: A Potential ‘Gold Mine’ for Tax Investigators

A new landlord database, currently in draft legislation phase, could provide HM Revenue and Customs (HMRC) with valuable information to pursue landlords for unpaid tax, according to BDO, a leading accountancy and business advisory firm.

The Renters (Reform) Bill, presented to Parliament this week, proposes the establishment of a private rented sector database. This database would contain details of landlords and their properties let under residential tenancies. While it isn’t explicitly stated in the Bill that HMRC will have complete access to all submitted registration information – unlike the equivalent provisions for the Register of Overseas Entities – it’s fair to speculate that the tax authority will utilise the publicly accessible data for compliance operations.

HMRC remains committed to ensuring landlords report their rental profits and sales gains, thereby paying the correct amount of tax due. It encourages those who have inadvertently made errors to voluntarily rectify their positions using the Let Property Campaign, part of HMRC’s Digital Disclosure Service, or other disclosure processes.

Furthermore, with the Land Registry’s implementation of new information requirements under the Levelling-up and Regeneration Bill – designed to broaden the transparency of property ownership and transactions – additional property data will be available to HMRC.

The incoming data from the landlord database will be amalgamated with the existing data accessible to HMRC. These include records from the Land Registry, the Register of Overseas Entities owning UK property, and HMRC’s own Connect database, which allegedly contains over 55 billion pieces of data. This data analysis is expected to aid HMRC in identifying cases for further investigation, aiming to enforce tax, late payment interest, and tax-related penalties.

Dawn Register, Head of Tax Dispute Resolution at BDO, expressed:

“HMRC already possesses considerable information on taxpayers’ financial affairs. The advent of this new private rented sector database will leave scant room for non-compliant landlords to evade scrutiny.

“Landlords who aren’t currently paying the correct amount of tax should proactively ensure their UK tax affairs are in order prior to the introduction of the register.

“Besides affording peace of mind, making an unprompted disclosure could lead to reduced tax-related penalties for errors, as opposed to correcting mistakes after being approached by HMRC. This will also help mitigate late payment interest – which currently stands at a 14-year high of 6.75% per annum and is slated to rise to 7% from 31 May.”