University of London professor, Richard Murphy, says that although it is perhaps impossible to calculate the exact figure, losses in undeclared tax from the buy-to-let sector could be as much as Â£1 billion annually.
Murphy analysed figures produced by Newham Council, London, which revealed that half of the buy-to-let landlords within the borough were not registered for self assessment with HMRC. It was estimated that Â£200 million of tax was not paid in London alone, as a result of the failure of landlords to register.
HMRC has estimated a loss of Â£550 million in tax per year across the whole of the country, but Murphyâ€™s larger figure comes from extrapolating Newhamâ€™s data estimating higher returns for London than the rest of the UK.
The loss of tax on rental income could be Â£480 per property and would be unlikely to include unpaid capital gains tax. A previous study in 2011 suggested that, of 200,000 buy-to-let properties sold that year, only 52,000 were declared for CGT that year. While accepting that it was possible for some properties to be sold at a loss or have realised non-chargeable gains, Murphy felt that at least half of all gains were not disclosed.
Murphyâ€™s criticism is directed solely at the government and his solution is to add a financial charge to landlords, all of whom he believes should be registered with HMRC.Â In his blog, Murphy says the negligence is â€œby government who refuse to collect tax owing for dogmatic reasons. We all have a right to be very angry with them.â€