QUESTION: I own a couple of residential properties and I have just received a letter from HMRC asking me to make sure I disclose my income and expenses in relation to let residential properties. What is the Let Property Campaign and how do I avail of it?
ANSWER: HM Revenue and Customs (HMRC) is continuing to issue letters to resident and non-resident landlords across the UK whom it believes have failed to declare their rental income.
HMRC’s Let Property Campaign was launched in the autumn of 2013, with a clear remit to provide residential landlords with a platform to disclose previously undeclared rental income. Thousands of landlords have already taken the opportunity to bring their income tax affairs up to date with HMRC and secure the best possible terms to pay the tax outstanding.
Five years on, the Let Property Campaign is still in full swing, with HMRC recently issuing a fresh batch of letters to landlords it suspects are failing to disclose their rental profits.
Anyone who is a landlord and has undisclosed income who notifies HMRC about unpaid tax via this scheme will have three months to calculate and pay the amount owed. The scheme is open to those that have multiple properties, landlords with single rentals, specialist landlords with student or workforce rentals, and holiday lettings. It is not open to those landlords who are letting out non-residential properties such as a shop, garage or commercial property, and cannot be used by those wishing to disclose income on behalf of a company or a trust.
Unlike previous campaigns, there is no disclosure ‘window’ requiring landlords to notify their intention to use the scheme by a specific date. HMRC says this campaign will be ongoing for some time; however, the tax authority warns that landlords intending to come forward who delay risk higher penalties if they are subject to an enquiry and they have not made an earlier disclosure.
HMRC also says it is currently increasing its targeted compliance activity across all landlord types and will start to identify and write to landlords who it considers may not have declared all their rental income. Anyone contacted as a result of this activity will not then be able to make use of the opportunity offered as part of this campaign.
Anyone who registered for self-assessment and completed tax returns within the appropriate time limits, but have simply made a careless mistake when declaring lettings income, will only pay for a maximum of six years, no matter how many years they are behind with their tax affairs.
However, HMRC says that if someone fails to come forward and is then found to be behind with their tax, HMRC can go back for up to 20 years. Penalties can be up to 100 per cent of the tax liability.
However, for the Let Property Campaign, if landlords submit an accurate voluntary disclosure, the rates are 0 per cent, 10 per cent, 20 per cent depending on the circumstances. Higher penalties of up to 200 per cent can be charged for an offshore liability.
HMRC says that if it writes to a landlord about Let Property Income and the landlord has not made a voluntary disclosure, any disclosure will be treated as ‘prompted’ and the person will not receive the same favourable penalty conditions. The full reduction available to the higher penalty, which is between 35 per cent and 70 per cent, will be offered if a landlord makes a disclosure by the date included in the letter.
:: Feargal McCormack (f.mccormack@pkffpm.com) is managing director of PKF-FPM (www.pkffpm.com). The advice in this column is specific to the facts surrounding the question posed. Neither the Irish News nor the contributors accept liability for any direct or indirect loss arising reliance placed on replies.
