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The HMRC consultation titled “Tackling the Hidden Economy” has identified HMOs and selective licensing in the private rental sector as an option for developing tax-registration checks.

The consultation proposes to tackle different areas of the hidden (non tax paying) economy by making access to licences needed to trade conditional on tax compliance, known as ‘conditionality’.

Click Here to see the full  HMRC paper.

HMRC wish to target Licences issued under the Housing Act 2004 as the government believes they
may be suitable for conditionality.

Selective licensing for private rented properties:

Part 3 of the Housing Act 2004 (the Act) sets out a scheme for licensing private rented properties in a local authority area in England and Wales. Under section 80 of the Act, a local authority can introduce selective licensing of privately rented homes in order to tackle problems in their areas (or any part or parts of them) caused by low housing demand or significant anti-social behaviour. In 2015, DCLG introduced further grounds for implementing selective licensing schemes: poor property conditions, high levels of migration, high levels of deprivation and high crime.

Where a selective licensing designation is made it applies to privately rented property in the are a, and all properties in the private rented sector are required to be licensed by the local housing authority (subject to certain exemptions). Local authorities in England are required to obtain confirmation from the Secretary of State for any selective licensing scheme which would cover more than 20% of their geographical area or would affect more than 20% of privately rented homes in the local authority area.

Houses in multiple occupation (HMO) licences:

A house in multiple occupancy (HMO) is a property rented out by at least three people who are not from one ‘household’ e.g. a family, but share facilities like the bathroom and kitchen. Licences are required for those who rent large HMOs. There are approximately 510,000 HMOs in England and approximately 64,000 of these are currently required to be licensed. The Department for Communities and Local Government (DCLG) recently consulted on changing the definition of mandatory licensing which would bring a further 160,000 HMOs in scope.

Local authorities have the power to introduce additional licensing schemes, which would capture further
HMOs. These licences must be renewed every 5 years.

The Paper goes on to say:

“The government values the private rented sector and wants to see a strong, healthy and vibrant market, which meets housing needs in a professional way.

This includes ensuring that landlords are reporting and paying the tax they owe.

To support this aim, HMRC is increasing its targeted compliance activity across the private rental sector through taskforce activity. It is also encouraging those who have been non-compliant to come forward through activities such as the Let Property Campaign

Applying conditionality to HMO licences could support existing HMRC compliance activity by helping and encouraging more landlords to ensure they are compliant with tax laws before renting out properties.

Similarly, there may be potential for tax-registration checks to be incorporated into selective licensing schemes where appropriate and proportionate.”

Source: Property 118

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