HMRC ponders turning landlords into customs agents

HMRC has launched a consultation; Sanctions to tackle tobacco duty evasion and other excise duty evasion. Following the launch, HMRC indicated to us that in the main this consultation applies to landlords of shops and other non-domestic properties but it could potentially apply to both the domestic and commercial sectors and are seeking views on its feasibility.

Imposing a Duty of Care

The consultation proposes to impose a statutory duty of care on landlords & landowners and introduce a new civil penalty for non-compliance with requirements to take “reasonable steps” to ensure that their property is not used to evade duty.

The duty of care would arise once the landlord has been notified that the tenant has evaded duty.

The “reasonable steps” a landlord should take include:

• Having provisions in all new leases making it clear that any illicit tobacco trading or any other illicit excise activity will terminate an existing lease
• Undertake periodic checks on the premises
• Evicting anyone who subsequently violates these provisions
• Taking steps to ensure they are aware of illicit activity and contacting HMRC if they have concerns
• Providing HMRC with a copy of the tenancy agreement

The NLA believes that it would be completely unreasonable to include private residential landlords within the scope of HMRC’s proposals to tackle tobacco and other excise duty evasion.

The consultation provides no evidence or rationale for including the PRS within the scope of the measures proposed. Indeed, most of the measures proposed really wouldn’t work in the sector.

While blanket provisions in tenancy agreements against illegal activity are commonplace, undertaking checks and taking steps to “ensure they aware” of such activity could lead to landlords skirting dangerously close to harassment of their tenants.

Tenants have the right to quiet enjoyment of their home, so a landlord keeping tabs on behalf of HMRC could disrupt that. Even evicting someone is rarely easy (or cheap).

Using the Section 8 eviction route for “illegal” activities may not even work as a backstop given that the relevant ground (Ground 14) is discretionary, meaning the courts could decide against eviction after a prolonged court process. As such the Section 21 route would be the more likely option for landlords which, as it needs to be done outside of a fixed-term, would completely counter-act the Government’s plans to encourage longer tenancies.

However, while possession is almost guaranteed through the the Section 21 possession process, it is not without significant cost to the landlord. Our own research has shown that where a tenant remains in the property until the bailiffs have arrived, the landlord is on average out £6,750 through rent arrears, legal costs and property damage.

Efficient Evictions

If HMRC does insist that such action is implemented in the PRS, then the only way to make it remotely workable is to follow in the footsteps of Right to Rent and make it easier for landlords to evict certain tenants that HMRC has identified.

For more information about the NLA, visit www.landlords.org.uk