Office of Tax Simplification – Landlords Survey

I just completed the survey. The questions lead you in a certain direction so they are influencing answers the way they want in order they can validate their decision to i) tax gross rental income on receipt throughout the year to be adjusted at year end (cash flow crisis here we come), ii) digital platforms & letting agents to report gross rental receipts throughout the year & iii) more regular self assessment reporting throughout the year. If landlords aren't reporting all gross rental receipts or in general the self employed aren't reporting all that they earn, I get it & if I were HMRC I might consider the same to try and tackle the black economy, but for the majority of landlords who do report every penny in rent received, if taxed at a nominal rate on gross receipts it would cause some landlords to crash & burn as some months/years, one can run up ridiculously high expenses from day to day repairs to never ending Section 20's, high buildings insurance excesses (e.g. I have £2,500 excess on escape of water on a flat in 1 block), goods replacements, new boilers, EPC improvements, tenant fees, licencing fees....the list goes on & on, which would not only create an additional admin burden day in/out to have to use online accounting software but also cause a cash flow nightmare. I have no concerns over agencies & digital platforms reporting gross rent receipts but what if managed personally or the rogue landlord who only collects his rent in cash. All these types of systems will do is put a massive burden on the good landlord & still not catch the bad/rogue one. Yet another nightmare waiting to happen. Why did I invest all my hard earned money & sacrifice my lifestyle en route all these years? I would have been better of spending it all & having no headaches nor worries.

Reply to the comment left by Laura Delow at 12/09/2019 - 10:41
Laura, you don't seem to have fully taken on board that the OTS is a completely independent body, unconnected to the government or HMRC. It can only research and then offer suggestions to government based on that research, with the aim of simplifying the overly-complex tax system currently in place.
I attended a landlords' meeting where a representative of the OTS gave a short explanatory talk on the role, aims and mandate of the Office.0000 followed by an open session for points, opinions and questions to be raised by the audience. The spokesman was at pains to emphasise that the transition to a digital regime of income reporting for tax purposes is definitely coming and we will all have to adjust to this but we have the opportunity, through their office, to raise issues which we see as problematical and thus possibly influence how the regime is implemented. More than one landlord raised the point you mention that the irregular nature and unpredictability of landlord expenditure means regular tax payments throughout the year would risk causing cashflow problems, possibly severe, for landlords and that it seemed likely that annual adjustments in the form of tax refunds would frequently be necessary at year-ends. (Landlords would obviously rather have cash earning interest in their bank accounts than in HMRC's, but it was pointed out that landlords are in any case paying tax in arrears unlike those on PAYE.) We were assured that all the points raised would be included in the report eventually forwarded to the Treasury and HMRC for consideration but it was in the end up to the Government to decide how to proceed. So the message is: this is your chance to raise issues and the more who do so the better, but there can be no guarantee how much influence your input will have. However, not bothering to respond means you forfeit any chance of influence.

I have completed the survey, and would encourage all landlords to do so. I list some of the questions below, to give you an idea of what the OTS has in mind if we do not fight it.

14. Would you find it helpful to be able to make payments throughout the year towards your final tax bill?

15. Would it be helpful if your bank deducted some tax from rental payments to your business bank account and paid it directly to HMRC?

16. Would it be helpful if your lettings agent deducted some tax from rental payments to you and paid it directly to HMRC?

17. Please give your reasons why you would not wish tax to be deduced (sic) by your bank and/or letting agent.

My answer was:

“Because tax is based on profit, not rent

Because it is absurd to suggest that a bank should be involved in analysing the credits to my account between rent and other.

Because there is no guarantee that letting agents would pay the deducted tax to HMRC, or that it would be credited to the right account.

Because it would be a complication to my accounting, and would need careful checking.

Because errors would be made.”

20. On a scale of 1 to 5, how useful would it be to have your estimated current tax liability position available through your Personal Tax Account/Business Tax Account

21. Would it be helpful to you if HMRC were able to pre-populate parts of your self-assessment tax return with information that they receive throughout the year from third parties such as banks, platforms or letting agents, which you could then confirm or amend at the end of the year?

Reply to the comment left by Old Mrs Landlord at 12/09/2019 - 11:49
it was pointed out that landlords are in any case paying tax in arrears

I’m not.
I have to make payments on account every January and July, as does every other landlord earning above a basic threshold.
So from a selfish point of view, if it wipes out some amateur landlords, it helps increase rents for the rest of us.

Reply to the comment left by Appalled Landlord at 12/09/2019 - 12:04
That's more or less what I said, but I was a lot ruder.

Reply to the comment left by Laura Delow at 12/09/2019 - 10:41
Very full comment and absolutely correct on every point! I was horrified by the survey. We ALL need to complete this and I'll be sharing it in all the FB landlord and tax groups of which I'm a member. It's shocking!!

Reply to the comment left by Monty Bodkin at 12/09/2019 - 14:00
I also make January and July payments but they are not in respect of the current fiscal year's income but the year which ended on the previous April 5th.

Reply to the comment left by Appalled Landlord at 12/09/2019 - 12:04
Aaaagh! Would it be helpful.... NO!

Reply to the comment left by Monty Bodkin at 12/09/2019 - 14:00
I also make January and July payments but they are not in respect of the current fiscal year's income but the year which ended on the previous April 5th.

Reply to the comment left by Appalled Landlord at 12/09/2019 - 12:04
Thanks for sharing your responses. I have made similar replies with the addition of mention of the mistakes I have found in my Accountants end of year reports and the time I spend going through this once a year let alone goodness knows how many more times a year if HMRC do go down the route of regular accounting.