Landlords are the latest target of a campaign by HM Revenue & Customs (HMRC) to collect previously undeclared tax.
Since 2007, HMRC have been running campaigns aimed at groups of taxpayers where they suspect a higher risk or tax error. Since introducing this system, they have reportedly collected over £596 million in previously unpaid tax from people making voluntary disclosures, and over £338 million from follow up activities.
Earlier this year, the legal sector was targeted with the Solicitor’s Tax Campaign, and previous campaigns have been aimed across the full spectrum of businesses and professions, including healthcare and doctors, electricians, plumbers and offshore accounts and assets.
The current Let Property Campaign provides an opportunity for landlords to bring their tax affairs up to date and declare any previously undisclosed income to the tax authorities under the best possible terms.
Penalties on previously undisclosed income are tax geared, and are based on a percentage of the tax due as a result of the previously undeclared income.
Lower penalties and payment plans can be negotiated under the Let Property Campaign if you make a voluntary disclosure, known as an ‘unprompted disclosure’. Landlords may also find that they receive a letter from HMRC under the heading ‘Let Property Campaign’. If this is the case, any disclosure will be classed as prompted, and the penalties charged will be less favourable.
HMRC have a range of sources which they use to detect undisclosed income. When investigating landlords, they are able to access records held by the Land Registry, and are also issuing statutory notices to letting agents to access their landlord information, which letting agents are legally obligated to provide.
Should the Let Property Campaign close without landlords receiving a letter or making an unprompted disclosure, and HMRC later find out about undeclared income, the penalties will be severe – potentially up to 100% of the tax due. Landlords also risk being investigated under Code of Practice 8/9, with the possibility of a criminal prosecution.
The Let Property Campaign is open to landlords who rent out single or multiple residential properties in the UK or abroad, those who rent out holiday homes, specialist landlords (such as student or workforce rentals) and those who rent out a room in their own home above the Rent a Room Scheme threshold (£4250 per year).
The campaign is not available to companies or trusts renting out residential property, or landlords renting out commercial property.
If you have no undisclosed income and your tax affairs are up to date, then you do not need to use the campaign. If you receive a letter about the campaign from HRMC and you do not need to participate in the campaign, you should respond to it to ensure that the information they hold about your circumstances is correct.
If you do intend to participate in the campaign, you must notify HMRC of your intention to participate in the campaign and then complete a disclosure form. If you are considering this, or you have received a Let Property Campaign letter from HRMC, it is strongly recommended that you seek professional advice.
There is currently no official end date to the Let Property Campaign, although it is recommended that if you are considering making a disclosure that you act quickly and voluntarily, in order to benefit from the more favourable terms the campaign offers.
Ormerod Rutter Chartered Accountants have a specialist team with experience of guiding landlords through the Let Property Campaign. Please contact us to arrange a free initial consultation.
Article Courtesy of: Ormerod Rutter Chartered Accountants