In the latest of its much-publicised campaigns designed to help taxpayers “ regularise “ their affairs, HMRC has launched its new Let Property Campaign targeted at private landlords who are suspected of under-declaring rental income.
Some 40,000 individual landlords have recently received a letter from HMRC under this Let Property Campaign and this outlines the opportunity for them to come clean about their tax affairs. These individuals are clearly believed to have not declared part or all of their rental income from residential property and are being offered favourable treatment for owning up and pleading guilty to past oversights. Leading tax advisers like Baker Tilly are urging anyone in receipt of one of these Let Property Campaign letters to take it very seriously as those choosing to ignore it and not make a disclosure risk being investigated under Code of Practice 8/9 with much higher penalties and even the possibility of criminal prosecution.
Those who are under the Revenue’s spotlight need not feel themselves being singled out unfairly. The Let Property Campaign merely follows on from a number of similar campaigns affecting everyone from plumbers and dentists to e-traders and private tutors.
Although HMRC will be mainly interested in under-declarations going back over 6 years, technically speaking, the law allows them to seek underpaid tax from up to 20 years ago. Those receiving one of these Let Property Campaign letters are strongly advised to come clean and make full disclosure under the amnesty so that more favourable penalties and payment timetables can be negotiated.
Once private landlords ( companies and trusts are not eligible ) have resolved to take advantage of the Let Property Campaign, they need to complete and submit a DO1 form which formally confirms their intention to take part in the Let Property Campaign. They will then have 3 months in which to submit their full disclosures with accurate details of both rental income and qualifying expenditure.
Those who think they can trust to luck and ignore the Let Property Campaign on the basis that HMRC would have difficulty in identifying relevant data about their letting activities need to be reminded that they can check with the computerised data of other central and local government agencies such as the Land Registry and the Tenancy Deposit Scheme.
In fairness, the Revenue do not consider everyone targeted by the Let Property Campaign as serial tax evaders. They cite plenty of instances where individuals’ Income Tax dealings have only ever been through the PAYE system and they do not fill out annual Self Assessment forms. They may start renting out an inherited property or a small buy-to-let investment and, largely through ignorance, simply wait for the tax man to actually request a payment.
Another very common error is the assumption that, if all one’s rental income goes on mortgage payments, there isn’t any income left over to pay tax on anyway. What many people fail to realise is that only the interest element of mortgage repayments is allowable against tax. The proportion that goes towards capital repayment is most definitely not.
These are just two of the many common errors targeted by the Let Property Campaign.
To find out more about the Let Property Campaign and what it means for you visit: http://www.bakertilly.co.uk/publications/Pages/Landlords-pay-up-or-face-the-consequences.aspx