Rogue Agent Refuses to Pay £150,000 Rent to Landlord

Refusing to pay a landlord guaranteed rents of £150,000 has seen a mystery letting agent kicked out of a government-approved scheme that polices fair play between property professionals. 

The landlord complained about a rent-to-rent deal with the agents to the Property Redress Scheme (PRS). 

The PRS ordered the agent to hand the landlord £25,000 – the maximum award a redress scheme can make. However, the agent refused to make the payment, so was expelled from the PRS.

The rent-to-rent deal goes wrong

Expulsion means the agent must stop trading as membership of the PRS or Property Ombudsman Scheme is compulsory, and removal from one list means the agent cannot join the other. 

The landlord is taking the former letting agent to court to recover the lost cash. The landlord contracted eight homes to the letting agent, but the agent struggled to find tenants during the COVID-19 lockdown. The rent-to-rent agreement is believed to have specified the agent should pay the rent regardless of if tenants moved in. The landlord tried to ease the agent’s financial problems by reducing the rent during the coronavirus lockdowns.

R2R complaints up 43%

Sean Hooker, head of redress at the PRS, said: “Guaranteed rent, or rent to rent, operators are becoming more and more common in the private rented sector, as it offers a lower barrier to entry into the property market. 

“Whilst there are reputable operators who have been providing the service for many years, there is a significant proportion of the market who are less experienced and need to make sure they fully understand their obligations and responsibilities.”

He added that rent-to-rent complaints had risen by 43 per cent since 2018. Most complaints involve sitting tenants, rent loss or damage to property arising from a lack of understanding of the agreement or poor drafting of rent-to-rent contracts.

HMRC reveals tax avoidance blackspots for landlords

London’s commuter belt is the top hotspot for landlords admitting tax avoidance. Eight out of 10 of the worst places for tax cheats in the UK are in or around the capital. In London’s East End, Ilford ranks the number one town for tax cheats, with 48 landlords admitting tax avoidance to HM Revenue & Customs (HMRC). The only places outside the capital in the listing are Paisley, near Glasgow, and Edinburgh. The top 10 listings are:

Source: UHY Hacker The landlords admitted tax avoidance as part of HMRC’s Let Property Campaign. HMRC scours the internet for property rental data, such as portals like Rightmove and Zoopla.  

Data from the portals is cross-referenced against council tax bills and Land Registry information by HMRC’s Connect AI. If details of a letting are discovered, and the landlord has not declared the income on a tax return,  a letter is mailed out warning of the consequences of tax avoidance. The campaign has encouraged hundreds of landlords to file tax returns, raising £17.7 million in back tax in the past year.

Neela Chauhan, a partner at UHY Hacker Young, said: “HMRC sees rich pickings in the buy-to-let market in terms of the unpaid tax. The amounts collected from landlords who have voluntarily come forward suggest they may be right in their assessment. 

“Landlords leave themselves vulnerable to prosecution and even a prison sentence if they fail to declare the correct amount of rental income or pay CGT on the sale of buy-to-let properties. 

“Given the consequences of laying low, proactively admitting a possible error to HMRC is unquestionably the prudent course of action.”

MTD for landlords put back a year

Making Tax Digital for landlords faces another in a long history of delays. Due to start in April 2023, the measure is lined up for April 2024, according to Financial Secretary Liz Frazer. Then Chancellor George Osborne first introduced MTD in 2015. The latest delay is blamed on disruption triggered by the COVID-19 pandemic, which has stopped HM Revenue & Customs from thoroughly testing the system.

“We recognise that, as we emerge from the pandemic, everyone must have enough time to prepare for the change, which is why we’re giving people an extra year to do so. We remain firmly committed to Making Tax Digital and building a tax system fit for the 21st century,” said Frazer.

MTD means landlords earning £10,000 or more a year in rents must keep digital records in a standard format and make quarterly income and expenses reports online.

HMRC chases a slice of staycation profits

Holiday let owners who cashed in on the UK staycation bonanza due to the COVID-19 pandemic are coming under increased scrutiny from the taxman. HMRC has struck several deals with holiday letting firms that allow them to access their bookings databases – including online giants like Airbnb. During the summer, bookings were up 300 per cent, and the staycation business was worth more than £50 billion. HMRC fears many holiday let landlords will not declare their earnings, so it plans to check their tax returns in more detail.

“With the boom in staycations driven by the pandemic, leading to a bumper season for UK holiday lets, HMRC will likely come for their slice of the pie,” said Neela Chauhan, of UHY Hacker. 

“HMRC will be checking tax returns from people who have let property for a jump in declared income to reflect the staycation boom. Their algorithms will fairly easily identify those holiday homeowners who they think are under-declaring income.” 

“As HMRC’s Let Property Campaign targeting buy-to-let landlords shows, the Treasury sees landlords as an obvious target for tax investigations and extra tax revenue.” 

“Landlords are recommended to make sure they are aware of their tax obligations before spending their summer ‘staycation’ windfall.” 

“Landlords who fail to declare unpaid taxes are ultimately risking fines and criminal prosecution.”