We have seen a marked increase in HMRC activity in this area over the last few years. It isn’t uncommon for us to receive several calls each month from people who have had letters from HMRC asking them to confirm what properties they own and provide details of their rental income. In most cases HMRC also ask for a schedule of worldwide assets and for the taxpayer to provide all their bank statements to HMRC for review.
The enquiry letters are based on information obtained by HMRC from the Land Registry along with housing benefit payments that are paid to landlords directly. HMRC has certainly been very busy in this area for several years now and, in the majority of cases, they have a very good idea of the properties that you own and the level of rental income or capital gains that they expect to see on your tax returns. But their information isn’t always accurate, and their request to see bank statements, and asking you to provide a schedule of your worldwide assets, is often excessive and can be challenged by the experienced tax professional.
Even in cases where rental profits or capital gains have not been correctly disclosed, it is still possible to reach agreement with HMRC about the additional tax, interest and penalties. Raffingers has a proven track record of successful negotiations in this area and can help anyone who has received an enquiry letter. People tend to forget that HMRC has a backlog of potential landlord enquiry cases and all the Inspector wants to do is assess any underpaid tax and move on to the next case.
But as a result of HMRC’s activities in the landlord sector, we are also receiving enquiries from people who wish to make a disclosure to HMRC about undeclared rental income or capital gains from property disposals before they hear from HMRC. This is certainly a good idea and can bring peace of mind, and it is the main reason for this particular blog. If you find yourself in this situation, you should be aware of HMRC’s Let Property Campaign and know just how easy it is to use.
We have now used the landlord disclosure facility on a number of occasions and have found this easy to use and the whole process is quite straightforward. More importantly, the officers at HMRC have been very helpful and supportive and, to date, we have had 100% agreement from HMRC regarding our disclosures in terms of the tax chargeable and the level of penalties that we proposed. In one particular case, HMRC agreed to a 10% penalty loading and allowed the taxpayer time to pay the additional tax.
HMRC’s published guidance explains that the Let Property Campaign gives taxpayers “An opportunity to bring your tax affairs up to date if you’re an individual landlord letting out residential property in the UK or abroad and to get the best possible terms to pay the tax you owe”. It also explains that “If you owe tax on your letting income you’ll need to tell HM Revenue and Customs (HMRC) about the income you haven’t declared by making a voluntary disclosure. To get the best possible terms, you must tell HMRC that you wish to take part. You’ll then have 90 days to calculate and pay what you owe”.
The campaign is open to individual landlords renting out residential property.
This includes you if you’re:
- renting out a single property
- renting out multiple properties
- a specialist landlord, eg student or workforce rentals
- renting out a room in your main home for more than the Rent a Room Scheme threshold
- living abroad and renting out a property in the UK
- living in the UK and renting a property abroad
- renting out a holiday home even if you use it yourself