Come 1 April 2009, the UK’s tax authority, HM Revenue and Customs, will implement new guidelines that will give inspectors new powers to follow up untaxed rental income and gains from landlords. The authority’s officers will have the power to turn up and inspect business records at the business premises, or, in some cases, at private residences, though restrictions apply to parts of the home that are purely residential.

HMRC told WealthBriefing that a letter has been sent out to all owners of buy-to-let properties reminding them of their tax responsibilities and detailing new procedures allowing officers to turn up at a landlord’s business premise to inspect business records.

The tax authority said: “The ability to visit business premises to check business records and assets is an important tool in tackling non-compliance.”

According to Grant Thornton tax director, Phil Espin, "It's likely that only the most serious cases will warrant a knock on the door from the taxman, but it signals HMRC's intent to pursue persistent tax evaders.

“The occupier will normally be notified at least seven days in advance of an inspection.  However, in limited circumstances, no notice need be given for an inspection and officers can turn up unannounced.”

These unannounced visits will concern what HMRC considers to be high-risk offenders, the more money potentially owed, the higher the risk. Sanctions will also depend on the severity of the offence and though each individual will be dealt with on a case-by-case basis, criminal prosecution will be considered.

An HRMC spokesperson told WealthBriefing: “The unauthorised visits must be internally pre-authorised by a senior official, who is experienced and specially trained. The full requirements for who will pre-authorise the unannounced visits is not yet confirmed, this will be considered and discussed before it becomes final.”

Though in general an HMRC officer will call to arrange a meeting and inform the landlord that something is wrong, Mr Espin advises landlords to keep business and private records separate so as to avoid an inspector seeing personal records that they have no right to.