A proposed new tax scheme aimed at reducing rental tax fraud by allowing letting agents to pay tax on their landlord’s behalf has been universally panned by official focus groups.

Government researchers assessed the idea of an alternative voluntary ‘withholding process’ to UK resident landlords, whereby agents would administer and collect tax on income from property on their behalf and pass it directly to HMRC – loosely based on the Non-Resident Landlord Scheme already administered by some letting agents.

None of the landlords interviewed would have volunteered for the scheme, as most saw administration of tax as outside the letting agents’ remit and did not want them being privy to personal financial details.

They were also opposed to paying for it, particularly those who chose not to use a letting agency’s fully managed service.

Letting agent opinions on the scheme were mixed, with those who worked for a small or independent agency tending to be more negative.

Concern

A common concern was who would be accountable if a letting agent failed to pay the tax to HMRC, or if a tenant defaulted on rent, and whether landlords would be accountable for letting agent fraud or error.

Landlords were generally more receptive to the idea of a digital Personal Tax Account which was seen to have the potential to more accurately record tax, reducing the need for long phone calls with HMRC. It was also seen to be a more efficient, faster system, which could reduce the administration burden for the taxpayer.

Those with higher or variable yearly tax bills, and those who did not update information in real time could see the benefit of avoiding a large yearly bill that they found hard to save for; paying tax monthly was seen to make it easier to plan, budget and control their finances.

Research was carried out in January and February 2016, with 20 letting agents and 54 landlords who owned between one and 15 properties, but has only now been published.

Read the report in full.

7 COMMENTS

  1. What a ridiculous idea! I certainly wouldn’t want a third party with no knowledge of my financial affairs making payments to HMRC on my behalf. Can you imagine the effort that would be required to claim back your overpayment!

  2. They might tax rental income at source. However, what about my overheads such as repairs? Overseas landlords have tax deducted.

    What about landlords who rent properties directly to tenants? What about landlords who only use a let-only service?

    The Government does n’t know what know what it is doing.

    They introduced Licensing, so the tax man has a list of landlords. They have the EPC register. They have council tax records. They have deposit scheme. How much more?

    It is just another duplication of effort. Given that there are MPs who are landlords, it is amazing that they can come up with awful policy ideas.

    Businesses are getting mugged with subscription based Making Tax Digital (MTD).

    I throught Brexit was strip away regulation, but is just getting worse and worse. According to recent LZ article Landlords have to deal with 400+ pieces of regulation.

    I have agents cheat and not pay me the rent. Trading Standards failed to shut them down.

    If the tax man wants more money, they can help catch non-paying renters or those who wreck properties, so I can pay more tax!

  3. Love our choices – landlords were asked to choose their preference for a really bad scheme or a really, really bad scheme. And the resulting spin “landlords saw the benefits of……”

  4. Landlord man has it spot on… jump or be pushed over the cliff.

    The sample size of this study is way too small too.

    Yet another reason for landlords to leave the PRS at a time when its becoming clearer everyday that there is a shortage of rental accommodation which is forcing rents up. Govt just don’t get it, too cosy with shelter etc.

    The PRS is just another business… we are not social workers. once ANY business model or area becomes unprofitable people will move away from it. The balance of risk to reward is increasing with all the red tape.

  5. Seen as you are being totally ridiculous don’t bother just get the Tenant to pay the tax on the Rent directly to HMRC up front.

  6. Govt is seeking to get rid of all 2nd home o.wners

    Invest in Portugal…………………300 days of Sun every year!

  7. Even more reason to leave the AST business model.

    Convert to FHL etc.
    Now however there is a problem with taxation of FHL.
    Essentially the new tax regime will render many FHL unviable and many 2nd homes.
    The new onerous requirements will force 2nd homeowners to sell up and FHLowners to do the same.

    Govt is clearly seeking to put out of business all those who have second properties however they are used.

    Investing in Portugal makes much more business sense……………….300 daysof sun every year

    Avoid Spain as their Title Deeds aren’t secure.

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