Property ownership/Property tax/Declaration of trust

[chiefmissile]

I have posted before but have a specific property rental question, I owned our marital home before we were married, therefore I believe that for HMRC purposes I am the beneficial owner, but legally if we were to divorce my wife would be entitled to 50% of the property.

I am in the military and after 3 years of marriage I was posted away from the area where our house is and decided to rent out our house and live in military married quarters. To cut a long story short we have undeclared rental income for the past 5 years, (Naivety rather than deliberate, we have not hidden any of the rental payments) we are about to declare to HMRC our over looked self assessment tax returns and undeclared rental income before they come knocking. How will HMRC bill unpaid rental income tax, will it be 100% me or because my wife has a beneficial interest will they allow here to use her personal allowance to offset the tax liability. If the answer is no then should I set up a declaration of trust giving my wife 99% (She has not been employed since the property was let) if so can this declaration of trust only be used to off set tax from the date the declaration is made or can it be used to back date and off set the rental income tax for the last 5 years? Can we use the cost incurred for the rent of our married quarter to off set the owned property rental income tax, as we had to move for military reasons?

When HMRC calculate the outstanding tax to be paid will they still allow the normal property expenses to be deducted even though I am in the wrong and only have emails to prove expenses (Apart from the leasing agreements)

What will the likely penalties be?

Thanks in advance

Andrew

[Peter D]

The income is solely your responsibility. Your wife is not an owner and there was no DofT or Form 17 submitted to HMRC. As you have not declared any rental income then I suspect they will not budge from that position. No you can not offset the rent for your married quarters it is not part of your rental business.
Yes all the noral expenses will be deductible but they may enquire into your accounts. Take a look on the HMRC web site uner penalties and back tax. Regards Peter

[chiefmissile]

Thanks Peter,

So there is nothing i can do but take the hit big time or is there something i can do to lessen the liability? I am paying 40% income tax, so itake it they will tax me 40% on the outstanding amount + penalty+Interest? What is the current HMRC interest rate?

[section 44]

back date

fraud?

[chiefmissile]

Yip,

Thanks but I asked an honest question. I am in the Military so as you can tell by my post's not a clue about tax, we never have to worry, we never get told about possible Tax issues, too busy in other parts of the world fighting or training. Maybe this is a government failing, no education about personal tax liability to members of the Armed Forces. When you are posted away from your own home on duty there is no brief about personal tax liabilities. Its hard enough fighting for your country, but when you have to defend yourself against HMRC due to non education on tax, life gets twice as hard, there should be mitigation for people like me who have never been educated in tax affairs, its not like I have tried to hide anything, I am coming clean, unlike some other more prominent tax evaders. Is HMRC as savvy about what the military do, I think not, so how can they expect members of the Armed Forces who are away from the UK for months and years on end to get it right if they have not been educated or are not in a position to liaise with HMRC? Shocking!! How do they expect people to come forward after they realise they have made a mistake if there is no room for mitigation. No wonder migration to other countries from the UK is high. People like me who come forward and admit mistakes should be applauded, unlike the thousands who evade millions of pounds of tax money. I am really proud to be British and serving my country, especially when I get treated like a criminal and accused of tax avoidance especially as its due to poor education by my employer, the Government!!


Regards

Andrew

[Peter D]

Not many, if any, employees receive personal tax education so do not feed aggrieved. No doubt you receive a tax coding each year. This tells you it is your responsibility to check the coding is correct and if there is any financial change in your circumstances you should inform HMRC. You started to receive a rental income and did not inform them. They do no not have a crystal ball. Regards Peter