Nudging landlords: Tenancy Deposit Scheme and letters from HMRC

The law in England and Wales requires that any deposit paid by a tenant renting a home on an assured shorthold tenancy must be held in an approved ‘Tenancy Deposit Scheme’.  A similar requirement applies in Scotland, although the law on private tenancies there is different. Information on what deposits are held is one of many pieces of data available to HMRC.  (Rule of thumb – if anything is on record about you anywhere, assume HMRC know it.)

Many landlords will have recently received a ‘nudge’ letter from HMRC, saying that a comparison of deposits held under a Tenancy Deposit Scheme with returned income ‘suggests that you may not have told us about all of your rental income’ and inviting reconsideration of the accuracy of returns: albeit that it appears that HMRC’s process may not have been any more sophisticated than multiplying the deposit by twelve and comparing it with gross rents declared.

The ‘nudge’ letter is not an enquiry.  If you receive one, you should check that your rental returns are indeed correct.  If there has been a mistake, it will need to be remedied as quickly as possible.

If, having checked, you find that HMRC’s concerns are misplaced and that your returns are correct, there is no need to do anything.  However, our advice is that HMRC should be notified that you are satisfied that there is ‘nothing to declare’, on the basis that this may help in forestalling any prospective enquiry.

For more information, and assistance in corresponding with HMRC, please get in touch with your usual BKL contact or use our enquiry form.

NICOLA HALL

BILSHAN MENSAH

Sam Inkersole

In 2022, Sam won the Taxation’s Rising Star award at the Taxation Awards in and was named in the Accountancy Age 35 Under 35.

Jon Wedge

While Jon’s client work focuses on the financial services sector, he also oversees the firm’s assurance service, as well as supporting the trainees following in his footsteps.

ELANA DIMMER

Elana joined us in 2017 as an ACA trainee, after graduating from Durham University where she had studied languages. She is now a manager in our assurance team.

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