While landlords, lenders and brokers are no doubt enjoying the growth of the buy-to-let market, they are not the only parties to be reaping the rewards of the resurgence. The taxman is also rubbing his hands in glee, with related revenues from the private rented sector currently exceeding £2bn a year.
Research by accountants UHY Hacker Young has revealed that buy-to-let tax takings are up by 13% year-on-year, proving that HM Revenue & Customs are acutely aware of the sector’s success and are clamping down accordingly. Of course, this won’t cause undue alarm to professional property investors who will have all their tax affairs in order, but it is certainly worth reminding novice landlords of their responsibilities.
Indeed, while those who have made a concerted push into the property investment market are likely to have researched the tax implications of buy-to-let, so-called ‘accidental landlords’ who have stumbled into the sector unintentionally after being unable to sell their residential property may not be as aware of their legal obligations. In addition to those who are genuinely ignorant of their duty to pay tax on any rental income, there are also a minority who choose to wilfully evade the taxman. Whether the avoidance is deliberate or not, HMRC is likely to take just as dim a view on those seen to be cheating the system.
This is especially true given the number of specific taskforces created to unearth cases of evasion. Just last year HRMC unveiled a number of regional operations including teams targeting Durham, East Anglia, Leeds, Leicester, Lincoln, London, Nottingham, Sunderland and York in June, followed by a group working across the South East from November. This isn’t to say that tax cheats in other locales are getting off scot-free, but more that the powers that be have obviously identified the aforementioned areas as being of particular concern. Indeed, with 30 taskforces launched between May 2011 and November 2012, the chances are that most towns will have come within the taxman’s sights.
Although ultimate accountability lies with the landlords themselves, that doesn’t mean that lenders and brokers shouldn’t be helping to remind property investors of their duties. This refers not just to tax matters, but to other obligations such as using tenancy deposit schemes and safety regulations. As the buy-to-let market continues its recovery apace, the number of new landlords seeking their slice of the pie is bound to increase so those of us already in the sector must be prepared to help educate these entrants. After all, it doesn’t reflect well on buy-to-let as a whole if fraudulent activity is occurring, so we can all help crack down on such cases. Quantity must not be allowed to dominate quality and if the right measures are put in place there is nothing to stop us being able to have both. There is so much positivity around the buy-to-let market at the moment given the increased activity, improved products and rates and interesting developments, so let’s not let a few bad apples spoil it for the rest of us.
Bob Young is managing director of CHL Mortgages