Landlords at home and abroad have shunned the chance to confess to HM Revenue & Customs about tax dodging and their rental profits.
Only 35,099 landlords out of an estimated 1.5 million avoiding tax have come forward in six years, leaving HMRC more than £400 million short on an expected £500 million windfall for the Treasury.
The figures show only 2.3% of landlords answered the call, paying just £85 million in additional tax, says accountancy firm Saffery Champness, which compiled the data from a Freedom of Information inquiry.
Only 81 landlords admitted that they had deliberately misled HMRC, while thousands more stated they had failed to notify tax was due (5,019) or had taken reasonable care with their tax returns but got the tax owed wrong (5,793).
More landlords have tax to pay
The Let Property Campaign was launched in a blaze of publicity aimed at giving landlords who failed to declare their full property profits a chance to clear their accounts for discounted penalties.
“Of the large number of taxpayers who stated that they had either failed to notify HMRC of their original liabilities or hadn’t taken reasonable care, many would likely have been unaware that they owed anything at all,” said James Hender, Head of Private Wealth at Saffery Champness.
“According to HMRC’s estimates, there are clearly many more landlords who have additional tax to pay, but have yet to come forward.
“If this is the case, then these people would be well advised to contact the taxman sooner rather than later. HMRC has been tightening the net on non-compliance and there are increasingly few opportunities for taxpayers to mitigate the risk of an investigation.”
Money spinners declining
The firm also warned the government may raise more taxes from property people.
“The Treasury says the biggest money spinners for the last century, including tobacco, alcohol and fuel duty, are declining due to changing lifestyle habits,” said partner Lucy Brennan.
“There seems to be a pattern emerging of HMRC targeting property as an asset that they could levy additional taxes on. This is already in motion, with a raft of tax changes set to hit second home owners and accidental landlords over the next year or so.
“You only need to look at France and the US to see that, in comparison, UK property is a relatively lightly taxed asset.”