Let property investigation - closure

[mills705]

Hi

I have been subject to a surprise inspection by HMRC in relation to a property transferred into my name by my dad. He currently rents it out to long term tenants- he receives the income and deals with all maintenance etc with the house. I have had no involvement in it at all.

We fully cooperated as HMRC also wanted my parents information.

I received a tax bill of just over 6k for 19/20 to 23/24 which was paid on receipt of the letter and a futher 1200 was paid for interest and then the penalties on top. There were a few issues on the 2nd letter for 1200 which I requested updates on before paying it as it was incorrect info. The figure then changed (presumably interest).

I have checked my Self assessment today and they are saying I owe a further £1.35.

I have paid the amounts owed in the timeframes they have provided me with.

Why do I still owe money? On calling HMRC can't actually explain it and pass me from compliance to self assessment?

[Lambs]

M,

It's a bit late in the day for me to ask this question but if your father receives all the income, why are you being taxed on it? Does he transfer any profits or similar to you?

There have been a couple of court cases recently where the tribunal has ignored who owns the property and focused instead only on who receives the money - the rents/profits. Arguably this is a break from the traditional approach, but HMRC made quite a big deal about it, and I am concerned that they are using old arguments when it suits, and the new arguments when it suits in opposing scenarios, etc., etc.

It is relevant to your later questions, although you are not necessarily obliged to take it up with HMRC.

With regards,

Lambs

[someone]

I have checked my Self assessment today and they are saying I owe a further £1.35.

IME the HMRC interest on their letters isn't calculated like a mortgage where they say "if you pay this by this date the interest will be no more than X", it's "if you pay it by the date on this letter the interest will be X".

Given that it takes weeks to months for HMRC to actually print and post a letter once they've dated it, that means that their interest figure is always an underestimate.

Years and years ago when I stopped being self-employed, they refunded a chunk of my payments on account. Then at the end of the year I owed a small amount of tax and so they charged interest (I don't remember the exact number but it was similar to your amount). I paid it the day I received the bill and then I got another bill for 1p, being the interest on the interest between the date of the letter and the date they received the payment (which I then ignored until my next tax bill the following year)

Even in those days, it must have cost them 30-50x as much to tell me about the 1p as it was worth if they collected it.

[wamstax]

It is a bit late in the day but I do not consider that you should have settled with HMRC in respect of the rental income generated on the property gifted to you by your father - assuming he transferred the ownership to you but retained the entitlement to the rental lease(s) in respect of the property.
If you read the Income Tax (Trading & Other Income) Act 2025 it says at S264 it says
264 - UK property business
A person's UK property business consists of—
(a)every business which the person carries on for generating income from land in the United Kingdom, and

(b)every transaction which the person enters into for that purpose otherwise than in the course of such a business.

So clearly YOU were doing neither and depending on the terms of the transfer you were not carrying on a business of generating income from land (and property) in the United Kingdom.

Your father would have been the person generating income from land in the UK on the assumption that he would still be the landlord named on the lease.

Really think that you should have taken advice from a sutiably qualified tax adviser but presumably you wil have settled by contract with HMRC and there would be difficulties in re-opening any contract settlement.

Mind you if your father was liable to tax there may be little overall loss - however in your place I would want to ensure that you are not being held liable for your father's sins if he didn't disclose his rental profits to hMRC in the past.

[wamstax]

Hi Lambs,
I recall in my younger days having the property schedules in my brain as the person being liable being the person "entitled to or receiving" the income and clearly S264 suggests that HMRC have taken advantage of an unrepresented taxpayer.