Thousands of landlords who have failed to pay tax on their rental problems face having their names passed to HM revenue & Customs by councils running licensing schemes.
The move was revealed by East London’s Newham Council, which has shared the registration details of 27,000 landlords with the tax authority.
Comparing the data against tax records showed 13,000 were avoiding income tax on profits and capital gains tax on investment disposals.
The council reckons landlords have avoided £200 million in unpaid tax just in the capital and that the bill runs into hundreds of millions more nationwide.
Other councils – including the RentSmart scheme in Wales – are expected to pass landlord details to HMRC as well.
The Mayor of Newham, Sir Robin Wales, said:
“It is our understanding that, to date, up to 13,000 Newham landlords are of interest to HMRC, where there are discrepancies between declared income and our records, with potentially significant financial implication for the exchequer.”
The council has released the figures as part of a campaign to persuade the government to renew the licensing scheme.
Ministers argue that the scheme imposes an unnecessary financial burden on landlords and have already thrown out an application for a similar scheme from Newham’s neighbouring council in Redbridge.
Newham revealed HMRC is currently contacting landlords who have failed to register their rental income.
HMRC has the power to claw back unpaid tax over 20 years, with penalties of up to 100% of the tax demanded plus interest and penalties.
According to HMRC, tax investigations in Newham has a result of the information sharing has raised £115 million in unpaid tax and interest.
Newham has also disclosed that the borough uncovered many more private rented homes than estimated.
The scheme was meant to cover 30,000 homes rented out by 5,000 landlords, but housing officials found 50,000 owned by 27,000 landlords representing 46% of the borough’s housing stock.
The council has also set up the first letting agent rating scheme, awarding firm’s up to five stars based on information about their services provided by landlords and tenants.
A list showing the rating will be published online.
The rating will include details about fees, customer service and the return of deposits.