Landlords may have to be registered with HMRC for tax purposes to be able to get a licence for Houses in Multiple Occupancy. The British tax office has revealed plans that means landlords will not get an HMO licence if they are not registered. This is a twofold clampdown, on both expat landlords who are not paying tax in the UK on money they earn through buy-to-lets, as well as landlords in the UK who are not paying the right amount of tax. In England, there are 510,000 HMOs, of which 64,000 need licensing.

The proposal has been published in a consultation paper which is open for discussion until March 2, 2018. However, the Department of Communities and Local Government is planning to bring thousands more properties into the licensing scheme. This could mean a further 160,000 HMOs come under scrutiny.

The document, which is titled ‘Tackling the hidden economy: public sector licensing’, says that the proposals are all part of the strategy to crack down on the hidden, or black, economy. It will help to promote tax registration and help customers understand what they need to do to declare their income and their obligation to be registered for tax purposes. The document also says that the government values the private-rental sector and wants to ensure it is a healthy and strong market, which meets the housing needs of the UK. This includes making sure that landlords pay the tax they owe. By applying tax-registration conditions to HMO licences, it will encourage more landlords to make sure they are complying with the tax laws before they rent out their properties. HMRC argues that this will prevent tax avoidance in the first place, whilst also putting a dent in the £3.5 billion tax gap.

Some local authorities have already been carrying out checks, such as the London Borough of Newham. Through checks with HMRC, it found more than 100 landlords who were applying for housing licences but were also avoiding paying tax. An FT report said that when Newham gave HMRC the names of the 27,000 registered landlords operating in the borough, simple checks showed 13,000 had not registered for self-assessment. Obviously, not all were avoiding tax because some could have been owned by companies and, therefore, had separate accounts, or tax could have been collected via PAYE. However, the FT report suggest that, even making allowances for this, you could still assume 10,000 were not declaring their rent as they should. All in all, it adds up to a problem which the tax office is now determined to address.

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