HMRC targets landlords using third-party data

HMRC has confirmed that it is using information received from third parties to identify landlords who may not have declared all of their rental income. The latest compliance campaign highlights the department’s increasing use of data matching to tackle errors and omissions. What should landlords do?

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According to HMRC, information obtained from a range of third-party sources is being used to identify landlords whose tax returns may not accurately reflect their property income. The data can include details provided by letting agents, local authorities and other organisations, allowing HMRC to compare information against tax returns already submitted.

Where discrepancies are identified, HMRC may write to landlords asking them to review their tax affairs or explain apparent differences. Although these letters do not constitute a formal enquiry, they are often the first step in a wider compliance exercise and should not be ignored.

The campaign reflects HMRC’s continued investment in data analytics and follows a series of “one-to-many” letter campaigns aimed at encouraging taxpayers to correct errors voluntarily before formal compliance action is considered.

Landlords who discover that rental income has been omitted or reported incorrectly should consider making a voluntary disclosure before HMRC opens an enquiry. Prompt action can reduce potential penalties and demonstrate a willingness to correct the position.

The use of third-party information is likely to become increasingly common as HMRC expands its digital compliance capabilities. Landlords should therefore ensure that rental income, allowable expenses and property ownership records are complete and accurately reflected in their tax returns.

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