HM Revenue & Customs want to enable individuals who rent out residential property to bring their tax affairs up to date. If you are eligible, you should take action now.
17/12/2013, by Low Incomes Tax Reform Group, Tax Articles - Income Tax
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Introduction
The Let Property Campaign is for individuals who let out residential property in the UK or abroad and who have not told HM Revenue & Customs (HMRC) about all their income and gains. The campaign was launched in December 2013 and will last for at least 18 months (until June 2015). Once you have notified HMRC that you have undisclosed income and gains, you will have three months to calculate and pay the tax, interest and penalties that you owe.
Why landlords should pay attention
HMRC are increasingly targeting landlords, and they will start to identify individual landlords who they think have undeclared rental income. This will happen during the campaign period. If HMRC start an enquiry or compliance check into your tax affairs, you will not then be able to take advantage of the let property campaign. So it is important that you take action to notify HMRC that you want to take part in the campaign and take steps to calculate and pay the tax you owe as soon as you realise that you are eligible. Otherwise, you might miss out and face higher penalties.
Who can use the Let Property Campaign?
You can use the campaign if you are an individual and you are a landlord, who lets out residential property, and you need to bring your tax affairs up to date. This includes the following, but be aware that this list is not exhaustive:
- Landlords who have multiple residential properties
- Landlords who have only one residential property
- People who have holiday lets
- Anyone who lets out a room in their main home and receives more than £4,250 in rental income per year, or £2,125 if the property is let jointly
- Landlords who let out residential property in the UK
- Landlords who let out residential property abroad
- People who live abroad and let out UK residential property
Who cannot use the Let Property Campaign?
The campaign is not for landlords who let out non-residential properties only, such as a shop or garage. The campaign is not for companies or trusts; it is just for individuals.
You cannot use the campaign if HMRC have already opened an investigation, enquiry or compliance check into your tax affairs.
What if you could have made a disclosure before but did not do so?
If you were eligible for a previous HMRC disclosure opportunity and you did not disclose at that time, HMRC may view your behaviour as deliberate. If, however, you did not use a previous campaign for which you were eligible through failure to take reasonable care, you should work out your penalties based on this. Only if you missed the opportunity through genuine error despite taking reasonable care should you not be liable to a penalty. There is space on the disclosure form to explain why you have applied a particular percentage of penalty.
What do I do?
There are two steps to the Let Property Campaign.
First, tell HMRC that you want to join the campaign and make a disclosure. There is no deadline for notifying HMRC yet, but you should tell HMRC as soon as you become aware that you have not declared all your income. HMRC will acknowledge your notification and send you a Disclosure Reference Number and Payment Reference Number. There are various methods of notifying HMRC:
- You can complete and submit a form electronically
- You can complete and submit a form by post to:
HM Revenue & Customs
Local Compliance Centres
Let Property Campaign Team S0790
PO Box 3900
Glasgow G70 6AA
- You can telephone the Let Property Campaign Helpline.
Secondly, you must make your disclosure and pay any tax and National Insurance Contributions that you owe, or claim any repayment that is due. You can do this as soon as you have your Disclosure Reference Number from HMRC, but you must do it within three months of the date you receive your notification acknowledgment.
Will I have to pay penalties?
HMRC have indicated that if you use the campaign, your penalty is likely to be either 0%, 10% or 20% of the additional tax and National Insurance contributions due. The precise percentage depends on the circumstances.
As part of your disclosure, it is up to you to decide the amount of penalty that applies. When HMRC review your disclosure, they will consider whether or not the penalty you have applied is reasonable.
What if I cannot pay the outstanding tax?
You should telephone the Let Property Campaign Helpline before you submit your disclosure, and it may be possible to set up a payment plan to spread your payments of the outstanding tax. Once you have discussed the payments with HMRC, you should submit your disclosure. Remember that you need to submit your disclosure within three months of your notification acknowledgement, so speak to HMRC as soon as you are aware you cannot afford to pay the tax.
Should I seek advice?
Although HMRC indicate that the process is straightforward, we would argue that it is fairly complex. There are detailed notes to read, calculations to do and completing a disclosure form in itself can be complex.
You should bear in mind that if you have claimed tax credits for any of the tax years for which you are submitting a late return under this campaign, your previous tax credit awards could be affected if your taxable income figure is higher than the amount you declared at the time for tax credit purposes. You may also have to pay a penalty.
LITRG’s advice is to consider employing a professional tax adviser, particularly if you have been receiving undeclared income for a number of years.
HMRC’s detailed guidance
HMRC’s detailed guidance about the Let Property Campaign can be found on the GOV.UK website.
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