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Where Taxpayers and Advisers Meet

Declare income for the first time - will they investigate

KP92
Posts: 3
Joined: Tue Dec 31, 2013 9:55 pm

Declare income for the first time - will they investigate

Postby KP92 » Tue Dec 31, 2013 9:59 pm

Hi,

I am really stressed about my mums tax return. She inherited a property from her husband back in 2009. Since then, she might have been getting rent from the property but I'm not too sure...she is mentally ill so she's confused as well. So far from her accounts I can't see any regular rent being paid since then, but there are some strange cash deposits so there could have been rental money - theses vary from a few hundred pounds to maximum £700. What I do know is, that the house has been empty the past year and I have put some money into the house to renovate it for her and now I have found some tenants. I now need to fill out a tax return form for her but I am scared that she will get in trouble for not notifying the hmrc of previous possible rental income. If i fill the form and send it off, are the hmrc likely to ask her questions?

She doesn't work, so this is her only income and she gets a couple of grand from a private pension.

The main thing I would like to know is if anyone has had previous experience on declaring rental income randomly and if they were asked questions.

King_Maker
Posts: 6538
Joined: Wed Aug 06, 2008 3:22 pm

Re: Declare income for the first time - will they investigate

Postby King_Maker » Wed Jan 01, 2014 12:33 pm

Income tax is due on any rental PROFIT, not INCOME.

So you will need to establish if the property was let and the amount of any allowable expenses.

When did she inherit the property?

KP92
Posts: 3
Joined: Tue Dec 31, 2013 9:55 pm

Re: Declare income for the first time - will they investigate

Postby KP92 » Wed Jan 01, 2014 2:18 pm

She inherited the property in August 2009.

The mortgage was paid off before my dad passed away, so I think the rent will purely be profit from now on.

There were people living at the house last year but then I managed to get the house empty because I werent sure if they were paying my mum rent. There was no contract, mum was paying the council tax and water bill direct debit every month for them and she doesnt have any records to show the money coming in. If there was she must have spent it or something.

Do you think it's best if I directly tell the HMRC what has happened and I'm not sure what to do about it, and that they can try and talk to my mum but I dont think they'll get anywhere with her mental illness or should I just file a tax return when it's due and hope for the best that it will just be accepted with no questions asked?

Tax Champion
Posts: 371
Joined: Wed Aug 06, 2008 4:09 pm

Re: Declare income for the first time - will they investigate

Postby Tax Champion » Thu Jan 02, 2014 12:28 am

You have said that your mother is mentally ill. In these circumstances it is best to take legal advice to see if her assets should be placed in trust. As far as the past is concerned she will be liable to tax on her income in the same way everyone else is. There may be other income and allowances that need to be taken into account to assess her actual liability. I would like to believe that HMRC would treat this type of situation with some sympathy and support. I would recommend she makes a voluntary disclosure asap.

King_Maker
Posts: 6538
Joined: Wed Aug 06, 2008 3:22 pm

Re: Declare income for the first time - will they investigate

Postby King_Maker » Thu Jan 02, 2014 8:43 am

She inherited the property in August 2009.

The mortgage was paid off before my dad passed away, so I think the rent will purely be profit from now on.

There were people living at the house last year but then I managed to get the house empty because I werent sure if they were paying my mum rent. There was no contract, mum was paying the council tax and water bill direct debit every month for them and she doesnt have any records to show the money coming in. If there was she must have spent it or something.

Do you think it's best if I directly tell the HMRC what has happened and I'm not sure what to do about it, and that they can try and talk to my mum but I dont think they'll get anywhere with her mental illness or should I just file a tax return when it's due and hope for the best that it will just be accepted with no questions asked?
What about repairs, maintenance, insurance, council tax etc? Plus 10% Wear & Tear allowance, if the property was let furnished.

I think you need to take professional advice (legal, tax and medical) before contacting HMRC.

KP92
Posts: 3
Joined: Tue Dec 31, 2013 9:55 pm

Re: Declare income for the first time - will they investigate

Postby KP92 » Thu Jan 02, 2014 3:48 pm

I agree I think I do need to get an accountant to go through it all for her and maybe a letter from the GP explaining my mums condition and her refusal to take medication. I hope the HMRC are not too harsh on this. Thank you for your advice.


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