Property Income Amnesty
There are common myths surrounding rental properties and HM Revenue and Customs. The two I encounter most frequently are:
- "I don't make money from my property/properties, so I don't need to tell HMRC about it"
- "I own my property jointly with my wife, she already does a tax return, so we put it all on hers"
Both these statements are incorrect and probably mean that you either owe HMRC tax or at the very least some backdated tax returns. The bad news is that HMRC know it.
HMRC have been acquiring information from councils, mortgage companies, letting agencies and other online databases about individuals who own more than one property, or who appear to live somewhere different to the address that they have a mortgage on. This is a potentially very large revenue stream for HMRC and they know it. There is a potential for back dated tax returns, equating in back dated taxes, interest and penalties, which can be up to 100% of the tax owed, plus surcharges for non-completion of tax returns. Ouch!
However, it isn’t all bad news. At the moment, HMRC are running a kind of amnesty called the “Let Property Campaign”, where you can confess your tax sins (property only) to HMRC and although you will have to pay all back taxes due, the penalties will be lower (or even none at all).
So far the campaign has been a success for HMRC. 10,000 people have taken part and it has reportedly raised £5million for the treasury. However, it’s a win-win for HMRC, as they already know who should be coming forward, and if they don’t they will issue an enquiry notice to collect the information anyway.
It is important that you act before HMRC finds you, as once an enquiry notice has been issued, it is too late to take part in the Let Property Campaign. The process is easy, you just need to complete an online disclosure form and then you get 3 months to pay the tax that you owe.
However, I would recommend that you take advice from a qualified accountant before you complete the disclosure form. Property taxes are complex and have been going through a period of change. HMRC are unlikely to point out to you the tax allowable expenses that you could have claimed against your property income. It is also sensible to look at how your other income or losses can affect your property income.
The Let Property Campaign is only open to individuals that let out residential property. If you let out commercial property, you cannot use this campaign, nor can you if you rent property out via a limited company or a trust. You should definitely seek tax advice in these situations.
If you would like to discuss your own situation in confidence, please do contact me on 01904 567820 or Stacey@change-accountants.com.