HMRC plans major tax crackdown on UK property sector

HMRC plans major tax crackdown on UK property sector

HM Revenue & Customs is intensifying its compliance efforts targeting the property sector, aiming to recover up to £645 million in additional tax, a 40% increase from recent years, according to legal analysis by BCLP.

HMRC’s Large Business Directorate, responsible for overseeing around 2,000 large UK firms including major property groups, has increased its scrutiny on transactions, capital allowances, and Stamp Duty Land Tax (SDLT). This follows a significant boost in compliance officers and resources dedicated to closing the tax gap in real estate.

Landlords and property investors should prepare for heightened tax investigations and more complex compliance demands as HMRC tightens its approach to property taxation.

Details of HMRC’s increased compliance activity

The international law firm Bryan Cave Leighton Paisner (BCLP) has analysed data from HMRC’s Large Business Directorate (LBD), revealing that the tax under consideration for the largest property firms could reach £645 million. This figure marks a substantial rise from £461 million in 2024/25.

The LBD specialises in working with major UK businesses, including real estate groups, and its tax-under-consideration figure estimates the maximum potential additional tax liabilities currently being examined. BCLP attributes this increase to a strategic shift in HMRC’s compliance operations rather than an outright rise in non-compliance.

HMRC expanded its compliance workforce by over 1,600 officers in 2025/26, with plans to add 5,500 more by 2030. This investment has enabled more detailed reviews of property transactions, financing arrangements, and tax claims, particularly capital allowances and SDLT.

Capital allowances under scrutiny have risen from £483 million to £762 million, and SDLT cases from £77 million to £100 million. While these figures are not exclusive to the property sector, they highlight HMRC’s current focus areas.

Elizabeth Bradley, a BCLP partner, notes that the increased tax under consideration reflects the ramping up of compliance activity and the pressure on HMRC to close the tax gap. She warns that this creates a more challenging environment for real estate groups, with more issues flagged for investigation.

Context for landlords and the property sector

HMRC’s intensified compliance push comes amid broader regulatory and tax challenges facing landlords and property investors. The property sector has long been a focus for tax enforcement due to complex transactions, reliefs, and financing structures that can obscure tax liabilities.

The increase in compliance officers and use of data analytics means that even routine transactions may attract closer examination. Capital allowances, which allow landlords to claim tax relief on certain property-related expenditures, and SDLT, a tax on property purchases, are now key areas of HMRC’s scrutiny.

Furthermore, HMRC has become more reluctant to provide advance clearance or definitive rulings on tax treatment for property transactions. In 2025/26, 41% of requests for HMRC confirmation were rejected, with Corporation Tax and SDLT requests facing even higher refusal rates. This lack of clarity complicates tax planning for landlords and property groups.

Practical implications for landlords and agents

For landlords, especially those with larger portfolios or involved in complex property dealings, the increased HMRC focus means a higher risk of tax investigations and potential adjustments. It is advisable to review all tax claims and property transactions carefully to ensure compliance.

Letting agents and property managers should be aware that landlords may face delays or additional costs if HMRC opens compliance enquiries. Documentation supporting capital allowances claims and SDLT payments should be meticulously maintained and readily available.

Tax planning strategies relying on advance clearance from HMRC may need to be revisited, given the rising refusal rates for binding rulings. Landlords should seek professional advice to navigate the more uncertain compliance landscape and consider the impact of potential tax adjustments on cash flow and investment decisions.

Uncertainties and what landlords should watch

HMRC’s evolving approach introduces uncertainty around tax treatment of property transactions, with fewer clear answers available in advance. This may increase the risk of disputes and retrospective tax charges.

Landlords should monitor HMRC guidance closely and keep abreast of any changes in compliance focus or enforcement priorities. The scale of additional tax liabilities under consideration suggests that HMRC will continue to allocate significant resources to the property sector for the foreseeable future.

It remains unclear how HMRC’s strategy will affect smaller landlords or those with straightforward portfolios, but the overall trend points to a more rigorous and data-driven compliance environment.

What landlords should consider now

• Review and update records supporting capital allowances claims and SDLT payments to ensure accuracy and completeness.
• Consult tax professionals to assess current compliance risks and prepare for potential HMRC enquiries.
• Be cautious with tax planning relying on advance clearance from HMRC, given higher rejection rates.
• Maintain thorough documentation of all property transactions, financing arrangements, and tax filings.
• Stay informed about HMRC’s compliance activity and any sector-specific guidance or updates.

Supporting landlords through compliance challenges

The Landlord Association (TLA) offers members access to a range of compliance resources and practical guidance to help manage increased regulatory scrutiny. Our new property management and compliance platform, ORBIT, is currently available in BETA testing and is designed to assist landlords and letting agents in organising property records, managing rental documentation, and recording key compliance actions.

ORBIT’s developing features include tools to track repairs, inspections, and communications, which can be vital in demonstrating compliance during HMRC enquiries. Members can also access up-to-date information on tax and regulatory developments, helping to anticipate and prepare for changes in the compliance landscape.

Exploring TLA membership and ORBIT BETA access can provide landlords with practical support to navigate the more demanding tax environment and maintain well-documented portfolios.

Looking ahead, landlords should expect HMRC’s focus on the property sector to persist, making proactive compliance and thorough record-keeping essential. Staying informed and prepared will be key to managing the risks of increased tax scrutiny.

Sources: Landlord Today