HMRC steps up use of third-party data to target landlords

HMRC has continued its long-running campaign to identify landlords with undeclared rental income and recent activity shows just how much data it now draws on to do so.

Behind most of the letters landlords receive sits HMRC’s Connect system, which pulls information from more than 60 government and third-party sources to build a detailed picture of a person’s financial position.

The information that it uses can come from a variety of sources, including:

• The Land Registry, which flags property purchases, transfers and changes to title deeds.
• Tenancy deposit schemes, since a registered deposit creates a digital record that a property is being let.
• Letting agents, who are required to provide HMRC with details of the landlords they act for.
• Online platforms such as Airbnb and Booking.com, which now report income data directly to HMRC.
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None of these sources proves on its own that income has gone undeclared but taken together they build a pattern that could lead to a nudge letter through your door.

What a nudge letter means

A nudge letter is not a formal enquiry and does not mean a criminal investigation is underway.

It is a prompt inviting the recipient to review their position and come forward voluntarily through HMRC’s Let Property Campaign if anything needs correcting.

Landlords who do come forward voluntarily generally receive far better terms than those who wait for HMRC to open a formal enquiry, both in terms of penalties charged and the tone of any subsequent contact.

With the Let Property Campaign continuing to recover over £100 million a year from landlords and MTD for Income Tax now bringing many landlords into more frequent digital reporting, this is a good time to make sure rental income has been fully and correctly declared.

If you have received a letter from HMRC about rental income or simply want to check your position before HMRC gets in touch, speak to us.