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Tenants quizzed on the tax status of their landlords

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Written by: Emma Lunn
15/11/2019
Renters have been told not to ignore letters sent by HMRC investigating their landlords’ tax affairs.

The Chartered Institute of Taxation (CIOT) is advising renters not to ignore the letters from HMRC probing into their landlord’s tax situation.

The letters are compliance letters sent to tenants occupying residential property owned by non-resident corporate landlords.

The HMRC fact-finding letter suggests tenants may have to take tax off their own rental payments to ensure the correct tax is paid if their landlord is not resident in the UK and is not registered under the UK’s Non-resident Landlord Scheme (NRL) – or face a fine.

CIOT has questioned HMRC about the letters and is now urging any confused or concerned tenant not to ignore the letter and to seek advice if they need it.

The HMRC letters are accompanied by a form which asks the tenants for information about the property, such as whether it is owned by a trust and, if so, the date it was acquired by a trust, and details about the trustees, settlors and beneficiaries. The letter and questionnaire form are designed to gather information to ensure the correct tax is paid.

Brian Slater, chair of CIOT’s property taxes sub-committee, said: “The letters are likely to confuse tenants when there is no letting agency contracted to let the property and they have to deal with such requests from HMRC themselves.

“It is unlikely the individual tenant would know the answers required of many of the questions on the form unless they are closely connected to the landlord, say a relative. We are concerned that a tenant who receives this letter may be worried about how to respond, particularly if they do not have enough information or knowledge to answer the questions. A tenant may not know that the landlord’s usual place of abode is outside the UK and, even if they do, how will they know about their tax obligations? The wording at the end of the letter about errors and penalties could also alarm the recipient especially if they are not able to answer all the questions.”

HMRC suggests tenants should reply “not known” if they do not know the information for specific questions. However, there is no legal obligation to respond to the letter and questionnaire at all.

HMRC has now told the CIOT that it will no longer include in the letters the threat of penalties for tenants who fail to comply, and to amend future iterations of the letter to ask the tenant to show the letter to their tax adviser if they have one.

“We are concerned that these letters will land on the doormat of tenants who do not have a tax adviser and in some cases will be unable to pay for tax advice,” said Slater, “People who receive the letters should engage with HMRC, completing the questions as far as possible, and not ignore it. We suggest renters read the new advice published on our website. If tenants still have concerns or remain confused by HMRC’s letter, then they should seek advice from HMRC’s helpline or tax charities where eligible, or contact a tax adviser.”

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