No, really. I’m not being melodramatic. Not all tenants, and not all landlords, granted, but that is exactly what HMRC say may be done.
This is all about non-resident landlords, living overseas for more than 6 months a year. HMRC are (quite possibly rightly) concerned that they aren’t paying the tax due on their rental income from UK properties.
If your landlord lives abroad and you pay over £100 a week, you need to register with HMRC and deduct tax from your rent.
You also need to register with HMRC if you pay a UK representative of your landlord, such as a friend or family member, who isn’t a letting agent.
You don’t need to deduct the tax if HMRC has told you in writing that the landlord can receive the rent with no tax deducted, but you must still register with HMRC and complete an annual report.
If you’re a letting agent you must operate the Non-resident Landlord Scheme no matter how much rent you collect, unless HMRC has told you in writing that the landlord can receive the rent with no tax deducted. You may still need to register and complete an annual report.
You’re considered a letting agent under the scheme if you:
- help the landlord run their UK rental business
- receive their rent or control where it goes
- live in the UK for more than 6 months a year
Well, that is both pretty categorical, and, given that it is five years old, went under the radar at the time. Possibly because, at least as far as tenants went, it was unbelievably stupid, for reasons I’ll come back to.
Nonetheless, it appears that HMRC are doubling down. According to this article, they are writing to thousands of tenants of properties that they vaguely suspect to be let by overseas landlords. The letters demand:
- That the tenants give HMRC what information they have on the landlord, personal and financial.
- That the tenants pass on information about the landlord agents.
- Threatening that the tenants may have to deduct tax from their rent payments and pay it to HMRC instead
- And that if the tenants do not comply, they may be fined by HMRC.
Why is is utterly stupid?
Well, let us start with the fact that that the landlord does not have to give their address to the tenant for rent to be due. Section 47 Landlord and Tenant Act 1987 requires the landlord to give their address (their actual address) on a written demand to the tenant, but the only penalty is that service charges are not due until they do. Meanwhile, s.48 says rent isn’t due unless the landlord has provided an address for service of notices in England and Wales. That would routinely be the agent’s address. It doesn’t have to be the landlord’s own address.
So, landlord doesn’t provide their address, but the rent is still due. No penalty.
Now, under section 1 Landlord and Tenant Act 1985, the landlord must provide their name and address if demanded by the tenant. But the penalty if they don’t is that it is a criminal offence with a fine up to level 4 on the standard scale (£2,500). But realistically, what tenant is going to bring a private prosecution against a landlord of unknown address for this offence? It is not going to happen, and the tenant can certainly not be reasonably required to bring such a prosecution. (All of the criminal penalties for not providing information in the L&TA 1985 are similarly nonsense – most notably the offence under s.25 of not providing details of the invoices behind the service charge under s.23).
So, the blunt position is that the tenant has no way of knowing their landlord’s actual address, let alone whether they are an overseas landlord or not. (Don’t even suggest the land registry. That does not show landlords, just registered owners.)
Then there is this ‘deduct the tax from your rent payments and send it to HMRC thing. The rent payments are contractual. There is no basis for the tenant to turn around and say, “yes, I know it looks like I am in arrears, but actually I’ve just been paying your tax and HMRC made me do it”.
So, basically, HMRC would be asking tenants to get themselves evicted if they comply, or face a fine if they didn’t. This, forgive my language, is utter bullying.
If all HMRC are after is the agent’s details, so they can go after the agent instead (which would make more sense), then that is sort of OK – though still threatening entirely innocent tenants to get that information – but that is not what HMRC say.
Frankly, this is an complete disgrace. How dare they threaten tenants over information that they do not have and cannot realistically obtain?