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Taxation: Rental Income — Question

– in the House of Lords at 2:45 pm on 3rd December 2013.

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Photo of Lord Campbell-Savours Lord Campbell-Savours Labour 2:45 pm, 3rd December 2013

To ask Her Majesty’s Government what plans they have to ensure that taxation is paid on rental income on property owned by persons from overseas.

Photo of Lord Newby Lord Newby Lords Spokesperson (HM Treasury) (Whip), Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, the Government believe that non-resident landlords should pay tax as appropriate, and HMRC operates a withholding scheme to ensure compliance. Tenants and letting agents are required to withhold and pay HMRC basic rate tax. Landlords whose UK tax affairs are up to date may apply not to have tax withheld and be automatically entered into self-assessment. Non-resident landlords in self-assessment are subject to HMRC’s usual rigorous compliance checks.

Photo of Lord Campbell-Savours Lord Campbell-Savours Labour

My Lords, that only applies where a landlord uses an agent—I listened very carefully to the Minister’s response. How is it possible to quantify the scale of evasion on rental income without a means of establishing who owns what, what rents are paid, and to whom those rents are paid? Is there not a real need to establish a local authority-based national register of all domestic and overseas-based landlord rented-out property—a register that is accessible by HMRC? Is it not true that there is vast evasion in this area?

Photo of Lord Newby Lord Newby Lords Spokesperson (HM Treasury) (Whip), Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

It is not true that the scheme just covers letting agents. As I said, there are two other categories of people who should pay tax in this case: one, in the case of tenants, if their non-resident landlord wishes to go that way; and the other for the non-resident landlord to register for self-assessment. Perhaps I may give the noble Lord and the House some sense of the scale of the income generated from this scheme. In 2011-12, companies that held residential property in the UK on which tax was paid paid a total of some £375 million.

Photo of Lord Mackay of Clashfern Lord Mackay of Clashfern Conservative

My Lords, is there not scope for using the deduction-at-source method against rents? It seems to be at least as effective as any other likely way of getting money from people who are overseas.

Photo of Lord Newby Lord Newby Lords Spokesperson (HM Treasury) (Whip), Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, that is basically how this scheme operates. A letting agent has to take some 20% of the rent and pay it over to HMRC for the non-resident landlord.

Photo of Lord Howarth of Newport Lord Howarth of Newport Labour

My Lords, is the noble Lord able to confirm what I have been told—and I do not know whether this is correct—that in France, if you are a non-resident owner of residential property, you are taxed on the rentable value of that property whether or not you have let it? Does he know whether that is the case; and if it is, does he think that it is worth considering introducing it here?

Photo of Lord Newby Lord Newby Lords Spokesperson (HM Treasury) (Whip), Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, I do not know whether that is the case. I think that I might take advice from the noble Lord, Lord Lawson of Blaby.

Photo of Baroness Maddock Baroness Maddock Liberal Democrat

My Lords, I agree very much with what the noble Lord, Lord Campbell-Savours, said in his opening comments. There is a lack of transparency around who owns rental properties in this country. I do not know what the Government will do about that. If we want to improve the quality and standard of our rented properties, particularly the energy efficiency, it is vital that we know who owns the properties.

Photo of Lord Newby Lord Newby Lords Spokesperson (HM Treasury) (Whip), Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, as the noble Lord mentioned and the noble Baroness raised again, this is an extremely important and live issue, which I will raise again with my colleagues in the DCLG.

Photo of Lord Davies of Oldham Lord Davies of Oldham Shadow Spokesperson (Transport), Shadow Spokesperson (Treasury)

My Lords, is the Minister, a member of the Liberal Democrat Party, in favour of a mansion tax, which would certainly go a long way to dealing with this in terms of transparency of who owns property? He should be a little careful if he denies the validity of that, because the Chancellor has an awkward habit at present of listening to what the Labour Front-Bench says one day and doing something similar to it the next.

Photo of Lord Newby Lord Newby Lords Spokesperson (HM Treasury) (Whip), Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, I am sure that the whole House knows that the Liberal Democrats are in favour of a mansion tax. I remind the House that, in the recent Budget, the Government introduced an annual tax on high-value dwellings—so-called enveloped dwellings —owned by companies, which will generate from £15,000 a year for properties worth between £2 million and £5 million to £140,000 a year for properties worth more than £20 million.

Photo of Lord Anderson of Swansea Lord Anderson of Swansea Labour

My Lords, what advice is given to our local authorities to ensure that, when housing benefit is paid, the recipient landlord pays UK income tax?

Photo of Lord Newby Lord Newby Lords Spokesperson (HM Treasury) (Whip), Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

I do not know the strict answer to that question, but HMRC makes strong efforts to bring home to everybody who should be paying tax that they should be doing that, which is why the Government have put in almost an extra £1 billion a year towards tackling tax avoidance and evasion.

Photo of Lord Phillips of Sudbury Lord Phillips of Sudbury Liberal Democrat

My Lords, would my noble friend the Minister contemplate the fact that, in many London boroughs, 70% and more of the housing being purchased is purchased by foreign buyers? Many of them have poor credentials as to their abidance by law in their own states, let alone laws here. Might we not be getting near the time when we need to consider limiting the extent to which foreign buyers can dominate the housing market in London?

Photo of Lord Newby Lord Newby Lords Spokesperson (HM Treasury) (Whip), Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, there is a very disparate housing market in London. At the bottom end of the market, the vast bulk of houses are purchased domestically. At the very top end, the vast bulk of houses are purchased by foreign buyers, particularly from Russia, eastern Europe and the Far East. One key thing that we are very keen to try to achieve is a greater degree of housebuilding in London and elsewhere. Only by building a lot more houses will it be possible to satisfy the demands of a growing population.

Photo of Baroness Farrington of Ribbleton Baroness Farrington of Ribbleton Labour

My Lords, why has the Minister not undertaken to investigate the value of a register? Surely, it would help the Government, HMRC and taxpayers were a register to be established.