In recent years, HMRC have used a number of campaigns and amnesties to target particular groups of taxpayers. Usually for a defined period of time, taxpayers who fall within that group have a period of time to come forward to rectify their tax affairs and deal with any undeclared or under-declared income or gains. During these periods, HMRC focus much of their advertising effort on the sector concerned.
The Let Property Campaign has been on-going for some time, in fact since the Autumn of 2013. However, it has become more important in recent years as HMRC’s other penalty regime is changing and more and more landlords are receiving letters challenging their undeclared rental income.
Who can use the let property campaign to declare their income?
Most landlords can use the scheme, whether you are renting out a single property or multiple properties, of if you operate HMOs for students etc. It is also available if you are renting out a room in your own home, or if you live abroad and rent a property in the UK (or visa versa).
The main exclusions are that the scheme can’t be used by companies or trusts, or those with other types of undeclared income that don’t also have undeclared rental income.
What is the process of making the declaration?
Generally, the process tends to follow a pattern:
- As soon as possible, notify HMRC that you wish to make a declaration under the scheme. Delaying this could result in you receiving an enquiry letter from HMRC. Once you receive this letter, you are automatically on another penalty route which usually results in a much higher penalty become due later.
- Within 90 days, you need to make a submission to HMRC. This includes details of the undeclared income and expenses going back as far as you need to. In some cases, declarations often go back 20 years plus. This is your opportunity to ‘wipe the slate clean’, so it is important that everything is dealt with at this time.
- HMRC may often have questions or issues and you will need to deal with these and the correspondence sent.
- Under this scheme, it is necessary to propose the penalty you wish to pay. Whilst this may seem odd, greatest success is achieved by knowing the rules and applying them in a way which follows the HMRC manuals, but actually results in a low penalty becoming due.
- Once you have agreed the final amount due, you need to pay the liability, interest and penalties. In many cases, this can be a large sum of money and so there is a usually a period of negotiation with HMRC around organising “time to pay.”
What’s the best first step?
Having a
tax adviser who has used the scheme and understands its mechanics is key. Also, a
specialist property accountant who has experience dealing with portfolios of all sizes, so you can be sure you are minimising the tax and penalties due.
Contact Wisteria’s
property tax team today for a confidential discussion.