Residential landlords are the latest group to have been targeted in receiving ‘nudge’ letters from HM Revenue & Customs (HMRC).

The letters are part of a targeted ‘nudge’ campaign from HMRC to remind landlords of their obligation to declare their full rental income.

What is a ‘nudge’ letter

HMRC has used what has become known as ‘nudge’ letters since 2017. These communications are designed to prompt a response from the recipient by offering reduced fines for a declaration of unpaid tax.

The method has been used on numerous occasions, issuing them to taxpayers who hold overseas bank accounts and taxpayers who claim non-domicile status.

Nudge letters have also been sent to holders of crypto assets, reminding them that Capital Gains Tax (CGT) may be payable on income gained from the sale or trade of crypto assets.

The letters being sent to landlords suggest they review their tax position and include a certificate of tax position to be completed and returned, typically within 30 days.

Failure to reply could lead to fines, a further investigation or in more serious cases criminal prosecution.

So far 1,000 or so property owners suspected of tax underpayments have been sent a ‘nudge’ letter.

Evidence gathered via online data tracking

The evidence behind these recent approaches was gathered through online booking platforms like Vrbo and Airbnb. These sites are obliged to share data of registered users and their financial transactions.

Issuing the letters is a way to give taxpayers a genuine chance to rectify any discrepancies and pay tax on undeclared income.

Landlords can take out Client Protection Insurance via their accountant, which protects them against the costs of an HMRC investigation.

If you have received a ‘nudge’ letter from HMRC it is important to seek professional advice on the matter.

Need professional advice on property tax issues? Ask our team.