Outrageously the HMRC will be forcing tenants to tell them the tax status of their landlords.

The HMRC has recently sent out a fact finding letter that may mean tenants could have to take tax off of their monthly rent payments (and forward the amount to the HMRC) so that the correct tax is paid from landlords 'takings', if they live outside the UK and have failed to register with the Non- resident Landlord Scheme (NRL); otherwise tenants will be forced to pay a fine.

The CIOT, Chartered Institute of Taxation, is advising all tenants that if they feel 'Dazed and Confused' by the correspondence that they must not 'file it away somewhere' and should ask for help.

A separate form is enclosed with the letter asking tenants to supply details of the property's owner(s) i.e. is it owned by a Trust and if so when it became so and they must then supply further information about the trustees, settlors and beneficiaries; the correspondence will also include a statement that the contents are designed to gather information to make sure the 'owner' of the property pays the correct amount of tax.

Brian Slater, chair of CIOT’s property taxes sub-committee, said: “The letters are likely to confuse tenants when there is no letting agency contracted to let the property and they have to deal with such requests from HMRC themselves.

“It is unlikely the individual tenant would know the answers required of many of the questions on the form unless they are closely connected to the landlord, say a relative. We are concerned that a tenant who receives this letter may be worried about how to respond, particularly if they do not have enough information or knowledge to answer the questions. A tenant may not know that the landlord’s usual place of abode is outside the UK and, even if they do, how will they know about their tax obligations? The wording at the end of the letter about errors and penalties could also alarm the recipient especially if they are not able to answer all the questions.

“HMRC suggest tenants should reply ‘not known’ if they do not know the information for specific questions. There is no legal obligation to respond to the letter and questionnaire but the response will enable HMRC to help the tenant if further action is required or to quickly tell them that no further action is required.”

The CIOT has just been told by the HMRC that the letters will no longer include any threats of penalties if tenants are unable to comply, and that future versions of the correspondence will advise tenants to show the letter to any tax advisors they may have.

HMRC has now confirmed that the penalties listed in the letter will only be relevant if tenants have not deducted the tax at the specified time or just have not bothered to do so, and not if they have completed the form incorrectly.

Slater added: “We are concerned that these letters will land on the doormat of tenants who do not have a tax adviser and in some cases will be unable to pay for tax advice. People who receive the letters should engage with HMRC, completing the questions as far as possible, and not ignore it. We suggest renters read the new advice published on our website.

“If tenants still have concerns or remain confused by HMRC’s letter, then they should seek advice from HMRC’s helpline or tax charities where eligible, or contact a tax adviser.”

Richard Merrick of PIMS said: "Following the absolute 'runaway success' of the government's scheme of making landlords part of the Immigration and Border Patrol service (Right to Rent), they will now be 'contracting' tenants with zero remuneration as HMRC tax consultants, and shouldn't tenants be able to claim back any percentage of living expenses that is so favoured by Westminster?"