A letter from the taxman is enough to bring anyone out in a cold sweat. And if that missive is asking rather probing questions about your landlord, it has the potential to send you into a full-blown meltdown.

Tweeting Tales

Reports that these letters are in fact a scam have circulated through social media, but, rest assured, they are genuine and there is a very good reason for sending them to tenants.

Landlords who are based overseas may be avoiding paying tax on their rental income and the good old HM Revenues & Customs wants tenants to help provide them with some information to help clamp down on this tax evasion.

Who Does This Affect?

So, the facts: according to gov.uk, a landlord who lives abroad for more than six months of the year must pay tax on any income they get from renting out property in the UK, if the rent is more than £100 a week. The tax can be paid by a letting agent or the tenant themselves, who will need to register and deduct the tax from the rent.

There is no impact on UK-based landlords as they are not subject to tax at source.

If You’re A Tenant

This isn’t about pointing fingers or trying to stir up trouble. And there is every chance your overseas landlord is already fully compliant. A form will be included with the letter asking questions about the property and the landlord. Of course, you’re not going to know all the answers, but anything you can tell them will help.

Look at your landlord’s address on the tenancy agreement. If it is a non-UK address, it could be that you will need to register for the scheme. But, if you can’t answer a question, simply write ‘not known’. And if you have any concerns, seek advice.

If You’re A Landlord

If you’re a landlord, you may also receive a form. Answer all questions honestly. it is important to ensure that you are on the right side of the law as deliberate behaviour of non-compliance can result in expensive fines.

If your tenants/letting agents are paying the tax on your behalf it can be reclaimed from HMRC depending on whether it exceeds the final liability. It also helps in paying HMRC when the tax is due as you’ll have less tax to pay.

Our Advice

Our in-house tax expert said: “It is harder to get overseas customers to pay after the money has left the country, even after a successful tax investigation.

“So, it’s important that HMRC have all the facts to hand to make sure everyone is paying what they should.”

If you’re a landlord needing advice, call 01462 413249.