We have a client who owned a property since 2015 and this is the first time in 2022 he mentioned renting out the property. He claimed that he has never rented out this property in the past. However the address we hold for him in terms of his correspondence address & HMRC address is different to this property in question. Many years ago I know people use to look into the poll/voter register to confirm if someone has been living at a particular address. Currently we use Creditsafe to assess our clients but the information is not always clear.
- How do we find out where the client has been residing over the years?
- If you use the Voters Poll register would any of you have a link that you can direct me to ?
- what other possible solutions do others use to check where someone has been living over the years?
We are of the view that the client has not been honest about this property and with the tax office getting increasingly aggressive in declaring Rental income not declared in the past, we want to try and keep the client compliant.
We also think this is an AML issue that requires reporting if we suspect the client is not being honest.
Any thoughts or suggestions will be welcome.
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You don't need to check things but if you don't think they are right you need to consider your next steps.
From your posting, you have already got suspicions about the client!
6 or so years of council tax and either fuel bills or a rather damp property seems unlikely. Has he given you an explanation? Family members rent free. From your posting he has not given an explanation.
Ultimately, the client is responsible for his return and you're normally entitled to accept his word. You don't need him to prove it.
However, if you have sufficient evidence to believe that he's lying to you, that's a whole new ball game. Challenge him. Where was he living ? Did he have two properties? Why?
Ultimately, if you're not happy, disengage. Although there's always the temptation to carry on and hope for some profitable enquiry work........
We are not auditors nor are we tax investigators
But I do not like to act if the taxpayer struggles to convince me that he is coming clean.
So therefore, Mr client tell me how the property was being used.
Probably a cash rental but now the tenant is claiming housing benefit?
He claimed that he has never rented out this property in the past.
Are you sure it wasn't a second home? The obvious thing to ask for is a copy of the council tax bill that the client should have been paying.
I'm not sure if the client was allowed to register to vote at a second home and definitely doesn't need to so poll register won't help you.
Personally, I wouldn't be comfortable doing too much digging.
Much of the information you mention would be protected by data protection legislation.
"However the address we hold for him in terms of his correspondence address & HMRC address is different to this property in question"
So why is that in itself a problem?
Specifically, how does that lead you inexorably to doubt his claim "that he has never rented out this property in the past"?
I've met plenty of people with two properties (typically a town-house and a country weekend place - or more recently the reverse, a country-house and a bolt-hole flat in town), who never rent out either property.
It may seem odd not to maximise your return on an asset, but some people are happy with the capital appreciation and the improved lifestyle (without any admin costs resulting from managing lettings & repairs, etc).
Explain to him that HMRC will be able to see from land registry details how long he's had the second property. HMRC may well take an interest in understanding how he's financed the acquisition - whether by inheritance (unencumbered), rental income, excess business profits or other investment sources. If this isn’t clear to you it’s not going to be clear to HMRC either, so it doesn’t seem unreasonable for you to point that out to him and see how he replies. Of course, it may already be obvious to you that he’s had sufficient post-tax funds to be able to buy and maintain two properties, in which case it’s maybe quite a short conversation?
Did he ever have more than 1 residence? Did he ever make an election as to which was his main residence? Was or is he married? Depending on those answers, you may need to go on and consider further questions.
When he made purchases, where were things delivered? What address was on his driving licence, bank accounts etc? Where would his friends have expected to find him? If the properties are some distance from each other, where was he working and socialising? Whose name was the council tax, utility bills etc in (and can those be matched up to payments made on bank statements)? Do the utility bills support (if it was a 2nd residence) that it was the main one?
Everyone else seems to have focused on the undeclared rental income, so I've focused on the PRR mention in your title. I'd hope answering some of those questions above may give a better opening as to whether the property was being let. So if utility bills not in his name or not paid by him, why not? Whose name were they in or who was paying them, and why?
If the rental income only started in 2022, do the bank statements or property accounts support this? If it was his PRR, he would have had to move out. There would normally be a cost of doing so. Same with getting a property ready to rent for the first time.
You may want to wait and see if anyone more experienced and knowledgeable can offer an opinion on it. I can't give as comprehensive a reply as others can (yet, I'm working on it).
"...and with the tax office getting increasingly aggressive in declaring Rental income not declared in the past,..."
That's news to me. This is an area HMRC apply light touch penalties (if any) for tax fraudsters re let property campaign etc. as far as I'm aware.
Whereas if you've done a legitimate EBT HMRC will come down on you like a ton of bricks.
