The taxman is losing out on £550 million of landlord tax because a third of all buy-to-let owners allegedly fail to pay tax on rental profits.

Research has revealed that around a million landlords failed to declare any earnings over the past 12 months to HM Revenue and Customs (HMRC).

Investigative website Exaro says that 1.9 million private landlords did properly declare their revenue based on a Freedom of Information inquiry to HMRC..

Now it looks likely that HMRC will launch a crackdown later this year to catch up with errant landlords.

Richard Murphy , of the campaign group Tax Justice Network, , said it was time that HMRC got to grips with the problem.

Landlord tax not declared

He said: “Property has long been known as an area where people do not declare income.

“If they are not asked to pay landlord tax, they do not declare it.”

Under the rules, any landlord who is not signed up for tax self- assessment should declare any income from rents by October 5 in the following tax year.

HMRC acknowledges a problem with landlord tax non-payers, but said that most landlords with buy-to-let properties were paying what was expected and that avoidance by property investors was not ‘serious’.

However, HMRC also pointed out that the government has handed over nearly £1 billion in a bid to clamp down on tax evasion, which was making tax avoidance more difficult.

Meanwhile, one rent recovery company is urging the Chancellor George Osborne to use Budget 2013 to bring in lower taxes for landlords.

Landlord Assist says the move will help stimulate growth in the rental sector.

Call for tax breaks

The firm’s Graham Kinnear, said: “Housing is key to the recovery because there is a strong argument that every pound spent on housing leads to further money being spent in the wider economy.”

He said there was a need for increasing the numbers of properties available for rent to help meet soaring tenant demand.

The firm is urging the government to suspend stamp duty for a time to encourage new investors and help landlords with empty properties to bring them back into use.

To help support their argument, the firm point out that any fall in stamp duty revenue would be more than made up for with VAT income increases which would come from solicitors and surveyors fees as well as mortgage fees.

On a more controversial note, Mr Kinnear is also urging the government to reduce the rate of tax landlords face on rental income to help restore confidence to the sector.