HMRC is beginning a second home compliance campaign and has also secured access to Airbnb’s records. Although HMRC is being flexible in some areas to help ease the financial burden caused by the coronavirus pandemic (see here), these moves show a clear intention by HMRC not to let up in its efforts to reduce the tax gap.
Disposals of second homes will once again be targeted by a ‘nudge letter’ campaign. Around 14,000 taxpayers will receive letters inviting them to consider whether capital gains tax has arisen from a disposal made in the 2018-19 tax year. HMRC targeted the 2017-18 tax year in the same way and secured a number of disclosures. HMRC believes that approximately 2,000 taxpayers failed to disclose a capital gains tax liability in the 2018-19 tax year.
Full details are yet to be released but the campaign is expected to begin shortly. It appears that the letters will not include a request that taxpayers sign a certificate of tax position. Such requests, made in previous campaigns, are highly controversial due to HMRC implying that signature was mandatory. Another sign of successful industry pressure is that for the first time, each letter will detail HMRC’s specific concern. Taxpayers are not obliged to respond but should carefully consider their decision and seek advice. Higher penalties may be imposed where HMRC begins an enquiry or the taxpayer delays disclosure.
Airbnb landlords in the spotlight
Airbnb UK has agreed to provide HMRC with data on the earnings of hosts in the 2017-18 and 2018-19 tax years. The agreement resolves a two-year investigation into Airbnb UK, with the business also being required to pay an additional £1.8 million of corporation tax. HMRC will not have sniffed at the additional tax but the real boon is access to records relating to the approximately 225,000 Airbnb hosts across the UK.
HMRC has indicated that it will address any non-payment of tax by landlords in 2021-22. The timing is likely intended to give maximum time to review the data before beginning targeted enquiries. HMRC has until 31 January 2021 to open an enquiry into a self-assessment return for 2018-19, if the return was issued and submitted on time. The discovery rules mean that HMRC can go back as far as twenty years in some cases. If there is a longer history of non-payment, some landlords will be able to make a disclosure under the Let Property Campaign and limit the penalties that will be imposed on them.
For more information about any of the items raised in this article please contact Eric Wardle 01604 463110 or click here to email Eric.