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RSM UK's Andrew Hinsley has some advice if you have received a "nudge letter", where HMRC suspects undisclosed UK residential property income.

Introduction

Earlier this year HMRC wrote to many individual taxpayers in relation to information held about overseas income or gains. HMRC are now sending letters on residential property owned by overseas companies as a ‘nudge’ to encourage disclosure of rental income and benefits. 

HMRC are sending two letters:

1.    To the overseas company as owner of the property; and
2.    To ‘The Occupier’ of the residential property 

These letters are a ‘two-pronged attack’, separately requesting significant information from both the owner and the occupier of any properties held by overseas companies.

Letter to the Overseas Company

Where records indicate that an overseas company or trust owns a residential property, a letter referring to the Annual Tax on Enveloped Dwellings (ATED) is being sent directly to the company. The letter also brings attention to the non-resident landlord (NRL) scheme, requesting non-resident company tax returns to be sent to HMRC if the landlord lives abroad and lets or rents out the property. 

Letter to the Occupier of the Residential Property 

This letter notifies the occupier of a property owned by an overseas company that tax may need to be withheld from rent and paid to HMRC by the tenant. It explains the circumstances when this will be required and how to register. It also includes a form which requests numerous details, including the date the taxpayer first moved to the property and the amount of rent being paid.

In addition, the letter requests substantial information on the ownership structure of the property if it is held by a trust.

Action required

In many cases either the appropriate registrations will be in place or no rent is being paid. However, these letters should not be ignored. If no action is taken then HMRC is likely to follow up with further, more formal, enquiries.

We recommend that professional advice is taken before replying to establish the appropriate response in each individual case. It is also important to contact the occupier of the property to ascertain whether any such HMRC correspondence has been received.