A leading tax lawyer has warned that opposition from letting agents to hand over names and addresses of all past and present landlords on their books by HM Revenue and Customs would prove futile. Ian Hyde a tax partner at international law firm Pinsent Masons said the new rules being drawn up by HMRC to identify landlords not paying the correct tax, would create "an added burden of red tape for the letting business." However he warned this was not a concern for the Revenue whose aim was to ensure landlords should pay tax on income.
Under the proposals which HMRC say could raise £200 mln. (approx. 232 mln.) agents would have to reveal contact details for all the landlords they have ever dealt with, including those on an "introduction-only" basis.
HMRC currently has the power to ask for information where the agent collects rent on behalf of a landlord. It cannot do so where the agent has introduced a tenant to the landlord for a fee and the rent is then paid directly to the landlord.
Hyde a tax litigation specialist said: "HMRC is now more aggressive in collecting tax and more inventive in using its powers to do so. Where, as in this case, it doesn't quite have the right powers it is getting them and the Government is happy to help.
"One aspect of this initiative is concerned with taxpayers who choose not to pay tax. Its difficult for HMRC to identify who these people are and the easiest way of doing it is to force known intermediaries to give up lists of clients. Here it is the agents but the same happened to the main banks a few years ago in the offshore bank account disclosure "amnesty". Indeed HMRC are now pursuing the smaller banks.
Hyde added: "The rules won't come in until 2010. Under the new penalty regime introduced in April this year, there is a very good incentive to disclose any untaxed income before the Inspector calls".
Source: Brown Lloyd James Financial