Revealed: What Happens When HMRC Inspects Your Letting Agency – A Landlord’s Guide

Why HMRC AML Inspections Matter to Landlords

HM Revenue & Customs (HMRC) has stepped up anti-money laundering (AML) inspections of letting agencies, recognising the property sector’s vulnerability to financial crime. These inspections focus on whether agencies maintain comprehensive, accurate documentation and follow through on AML policies in practice.

For landlords, especially those working with letting agents or managing multiple properties, these inspections matter because an agency’s non-compliance can lead to severe penalties, reputational damage, and operational disruption. Ensuring your agency partner is inspection-ready protects your rental income streams and tenant relationships.

What HMRC Looks For During Inspections

HMRC inspectors expect rapid access to a broad range of AML documents and evidence, including:

• Written AML Policies: Must be tailored to the agency’s specific business model and regularly updated.
• Risk Assessments: Detailed AML risk assessments with clear rationale explaining how risks are identified and rated.
• Customer Due Diligence (CDD) Records: Comprehensive records including identity verification, politically exposed person (PEP) and sanctions checks.
• Training Records: Evidence of regular AML training and refresher sessions for all relevant staff.
• Monitoring and Reporting Procedures: Documentation showing active monitoring, record-keeping, escalation policies, and suspicious activity reporting.

A critical inspection focus is whether the documentation accurately reflects day-to-day business operations. Discrepancies between paperwork and practice often trigger compliance risks.

Common Compliance Risks Found

HMRC inspections frequently reveal:

• Lack of documented rationale for risk ratings or inconsistent application across clients.
• Poor record-keeping around exceptions or unusual transactions.
• Unclear identification of who makes key compliance decisions.
• Infrequent or undocumented reviews of AML policies and customer files.

Such gaps increase the risk of enforcement action and undermine confidence in the agency’s integrity.

Practical Implications for Different Landlord Profiles

• Single-Unit Landlords: While you may not operate AML controls yourself, verify your agent’s compliance status during onboarding and regular reviews.

• HMO and Portfolio Landlords: The complexity and volume of tenants increase AML risks. Ensure your agents have robust, documented AML processes proportionate to your portfolio’s size.

• Accidental Landlords: If handling lettings personally or via small agencies, be aware that AML obligations still apply, and scrutiny is increasing.

Immediate Steps to Take

1. Request AML Documentation From Your Agent: Ask for their current AML policy, risk assessments, and evidence of staff training.

2. Review and Benchmark: Compare these documents against HMRC’s published guidance and industry best practices. If gaps appear, discuss remediation timelines.

3. Schedule Regular Compliance Reviews: Build AML compliance checks into your landlord-agent performance meetings.

4. Prepare for Possible Disruption: Understand your agent’s contingency plans for inspections or enforcement actions.

5. Consider Internal Audits or Mock Inspections: If managing multiple properties or your own agency, conduct internal AML audits to identify and fix weaknesses.

6. Use Technology Tools: Platforms like Smart Compliance help maintain up-to-date AML records and generate inspection-ready compliance packs.

How Rentals & Sales Can Support You

At Rentals & Sales, we provide bespoke portfolio reviews and compliance audits tailored to your landlord profile. Our experts assess your agency’s AML preparedness, recommend corrective actions, and help you implement practical workflows to maintain ongoing compliance. We also offer pricing strategy advice to factor in compliance costs sustainably.

For landlords juggling multiple responsibilities, our support ensures you’re not caught off-guard by HMRC inspections or compliance failures.

Compliance Disclaimer: This article provides general information and does not constitute legal advice. Landlords and agents should consult qualified professionals for specific AML compliance guidance.