Newham council has discovered that half its 27,000 landlords have failed to register for self-assessment. Unpaid tax is estimated to be £200m in London alone.
Newham Council introduced a compulsory licensing scheme for landlords over 4 years ago and shared the landlord’s names and addresses with HMRC, according to a leading newspaper. HMRC has not confirmed any details but Newham council has stated that approximately 13,000 landlords have failed to register for self-assessment despite the legal obligation to do so.
HMRC has not ignored the information provided by Newham and is reported to have contacted these landlords as part of the Let Property Campaign which invites landlords to pay the tax owed plus interest. There are of course consequences for those that refuse to accept the ‘invitation.’
Prior to the mandatory landlord licensing scheme, Newham estimated that the borough had 30,000 private properties rented out by around 5,000 landlords. But following the licensing process, it discovered 50,000 rental properties owned by 27,000 separate landlords. This has been seen before in licensing schemes and illustrates how limited the knowledge of the size of the sector often is.
The boroughs of Liverpool, Waltham Forest, Barking and Dagenham and Croydon have also introduced substantial selective licensing schemes covering most of their area. However, these were before the permission regime for such schemes was altered and boroughs applying since have had applications to introduce similar wide schemes rejected by central government. The government’s position on landlord licensing schemes was made very clear in 2015 by the then Housing minister’s letter to all local authorities. Brandon Lewis MP warned local authorities of an amendment to licensing rules. He wrote:
“The blanket licensing approach adopted by some local authorities has major drawbacks. This is because it impacts on all landlords and places additional burdens on reputable landlords who are already fully compliant with their obligations, thereby creating additional unnecessary costs for reputable landlords which are generally passed on to tenants through higher rents.
“The vast majority of landlords provide a good service and the government does not believe it is right to impose unnecessary additional costs on them, or their tenants. Such an approach is disproportionate and unfairly penalises good landlords.”
Newham’s landlord licensing scheme comes to an end this December, and because of the government’s restrictions of 2015, it has applied for permission for another five-year period. We will update this post when we know the outcome of the application. With a change of Housing Minister it will be interesting to see whether he will take the same view as previous ministers.
The HMRC Let Property Campaign has been relatively successful in obtaining unpaid tax and there is no doubt that this success can be attributed in part to local authorities sharing information with central government. Accordingly, landlords and agents are advised to ensure that they are registered for self-assessment where applicable and submit annual returns by the relevant deadlines as it is clear that the drive to collect tax from landlords will continue.