(1888PressRelease)
February 23, 2007 - Landlords owning more than one property could be considered to be running a letting business and so need to adapt their tax payments accordingly, HM Revenue and Customs said on its website earlier this month.
In a hasty bid to catch tax evaders, officials set up a whistle blowing hotline, which has been utilised by 120,000 people in just two weeks.
Furthermore, the inspectors are using property adverts to tally up valuations declared by buy-to-let investors as part of a major new clampdown.
However, Malcolm Harrison, spokesperson for the Association of Residential Letting Agents (ARLA) claims that the vast majority of landlords have nothing to worry about because they are not in the business for short-term gain.
"It seems like a bit of a storm in a teacup to me, in that the tax regime for buy-to-let investors is not particularly hard - they are able to offset all their costs and everything," he said.
"The average buy-to-let investor knows that it is a long term investment, not a short term one, and like any long term investment the probability is that you're going to operate it properly."
The main reason why tax officials are seeking to make sure the industry is now properly regulated is mainly due to its rapid growth over the last 12 months. In 2006, buy-to-let borrowing accounted for 11.1 per cent of gross mortgage lending, up from nine per cent the previous year.
In addition, 330,000 mortgages were taken out last year amounting to £38.4 billion, an increase of 48 per cent by volume and 57 per cent by value on 2005's figure, according to the Council of Mortgage Lenders.
With house prices averaging around ten per cent last year, many investors have decided to opt for the property market as opposed to other investments such as shares and bonds and buy-to-let represents a no-fuss method of increasing return through both capital investment and rental yields.
Other contributory factors to the growth of buy-to-let include growing pressure on first-time buyers, an increase in mortgage options available to investors and more flexible lifestyle choices among the young, as Nigel Terrington, Paragon Group chief executive affirmed.
"Rising immigration, growing household numbers, expanding student population and the increasing tendency of young people to defer their first home purchase, all mean there is a need for greater flexibility in our housing stock," he said.
In 1998, when private investors were still getting to grips with the new laws and investment potential of the rental sector, there were just 28,000 buy-to-let mortgages issued to borrowers. Nine years later, this figure increased more than 30-fold, to 850,000.
