As a landlord letting a residential property you are required by the Housing Act 2004 to protect deposits provided by tenants on assured shorthold tenancies, by using a deposit scheme.

The not-for-profit companies that run these schemes will provide details of their customers to HMRC or to any other Government department that requests the information.

HMRC has recently received a large sample of data from deposit schemes and has compared the information to the amounts of rent reported on landlords’ tax returns for 2020/21. As a deposit usually represents four to five weeks of rent, HMRC can work out how much rent should have been declared by the landlord over the tax year.

HMRC is currently writing to landlords who have submitted deposits into tenancy deposit schemes, and who may have under-declared their rental income or capital gains. The letter urges the taxpayer to check and correct their 2020/21 tax return, and their 2021/22 tax return if it has already been submitted.

HMRC points out that the letter does not open a tax inquiry or ‘compliance check’, but it does ask the taxpayer to correct their 2020/21 tax return within 30 days.

If you receive one of these letters but you believe you have nothing to correct, you don’t have to do anything. But you may want to contact the HMRC group behind this letter by email at:

responseteam6@hmrc.gov.uk or phone: 03000 575 687.

Alternatively, if you haven’t fully declared your rental income for several years, you should consider making a full disclosure using HMRC’s Let Property Campaign. Our tax investigation experts can help you with this.

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