Letting agents and buy to let landlords who cheat the taxman face losing their assets and a jail sentence after a momentous Court of Appeal decision.
Small time businessman Gareth Steed was charged with three counts of tax evasion after failing to make tax returns and disclose his income.
For 2002-03, this amounted to a tax liability of just over £3,500 from self-employed trading as a builder and car dealer.
The sting in the tail came after he was found guilty of tax evasion. HM Revenue and Customs decided to confiscate Steed’s assets.
The taxman argued Steed had a criminal lifestyle that let them confiscate his assets on the basis he had committed a continuing offence for six months or more from which he gained a benefit of more than £5,000.
That amount was made up of the tax he owed plus a payment on account of the same amount again.
Concern over confiscation strategy
The judge at the confiscation hearing found against Steed and made an order to confiscate assets valued at £707,000 or ordered him to serve four years in prison if he defaults on payment.
The case decision means any letting agent or landlord who fails to tell the taxman they have an income from their property business – and then fails to declare their income and expenses by submitting a tax return – could face confiscation of their assets.
Lawyers and accountants claim cases that would previously have been settled out of court are now going to crown court so HMRC can pursue a confiscation order.
Even taxpayers who admit a ‘lesser’ offence and plead guilty in return for more lenient treatment are running the risk of having their assets confiscated.
The strategy is of particular concern to landlords who are running property businesses at a profit and have failed to submit tax returns for some years as they have significant assets to pursue.