Response: Tackling the Hidden Economy (PRS licensing)

Shelter supports the Government’s proposal to make access to licences needed to trade conditional on tax compliance, known as ‘conditionality’. We agree that applying conditionality to HMO licenses and selective licensing schemes could support existing HMRC compliance activity by helping and encouraging more landlords to ensure they are compliant with tax laws before renting out properties.

We believe that the majority of landlords take their responsibilities to their tenants very seriously, but a small minority don’t. Either wilfully, or through ignorance, they fail to comply with requirements. Evidence of non-compliance in one sector is linked to non-compliance in others and our recent research found that many PRS Housing Teams already work closely with other agencies, including HMRC.

We would expect increasing compliance in tax-registration to lead to higher standards across the PRS.  There is a risk that the new requirement will only cover those who are already broadly compliant, signed up to licensing schemes etc. and not operating under the radar. Criminal or deliberately negligent landlords are likely to attempt to evade licensing even in areas where licensing schemes currently exist.  Additionally, landlords who do not own an HMO or a property in an area covered by a selective licensing scheme will not fall within the new requirement.

We share HMRC’s concern that introducing tax-regulation checks into HMO and selective licensing conditions should place as few additional burdens on landlords and local authorities (as the licensing authority) as possible. Resources will need to be found to enable staff to familiarise themselves and landlords with the new requirements. There will also be additional resource required to manage any additional appeals that result from adding a condition to licensing schemes, whether for HMOs or in selective schemes. The additional costs for this should not come out of existing licensing fees.