Tax fraud alerts set to trap landlords who are not declaring rental income or are over stating earnings on mortgage application forms. Lenders now sharing information with HMRC

Property investors innocently switching homes or renting them out may fall foul of new measures to combat fraud.

Two new schemes have started this month aimed at fighting buy to let fraud – but may trap landlords maximising returns and tax reliefs for their properties.

The Council of Mortgage Lenders (CML) and HM Revenue and Customs (HMRC) have set up a joint scheme that gives lenders a single contact point to verify mortgage applicant’s incomes.

HMRC has indicated the information may be used as intelligence to fight tax evasion as the scheme allows tax inspectors to cross reference income claims on mortgage applications against declared income on tax returns.

Separately, information services company Experian, which tracks millions of people’s credit records for finance and utility companies, has started a home watch scheme that triggers an alert to the companies when a home is put up for sale or rent.

The alert is aimed at identifying new householders for marketing – but also warns financial and insurance firms if a customer is breaking the conditions of any mortgage or insurance contracts.

Both schemes are likely to flag up property investors as potential fraudsters if they switch homes between properties they own or decide to sell or rent a home.

Many property investors, with second homes or let-to-buy properties that they once lived in but now let, could face tax inquiries or have to give explanations to lenders and insurance companies if they move or sell a home.

The result could be increased mortgage and insurance payments as rates are generally higher on investment properties than someone’s main home.

“Besides giving organisations valuable insight to help customer acquisition and management activities, the alert service helps prevent ‘hidden’ buy-to-let fraud activity,” said Nick Evans, head of customer management at Experian.

“Insurance providers, utilities and telecommunications providers will also benefit from the service, which uses compliant data from a wide range of property sources.

“Insurance providers will be able to recognise those that may need new or revised policies as a result of moving house and to target investigations into fraudulent claims, while utilities providers and telecommunications companies are able to quickly identify new occupiers and ensure accurate billing is enacted for new and existing customers. ”

Editors Comments

If you need tax advice or you are worried about not filing tax returns or declaring rental income on your buy to let properties please call The Money Centre’s Customer Care Team on 01603 894525. You call is completely confidential. The team will be pleased to refer you to our recommended tax specialists who will provide straight forward advice. Our recommended partners charge £100 to complete a tax return plus £50 per annum per property to produce accounts.

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