Let it All Out
Reminder of HMRC’s Let Property Campaign
Each one of our accounting packages gives our clients full, unlimited access to our in-house experts and an important part of their job is keeping our clients informed of the latest changes in tax. Below, we’ve shared a reminder of HMRC’s recently updated guidance for making a disclosure under the ongoing Let Property Campaign.
The Let Property Campaign
The Let Property Campaign is an opportunity for landlords who owe tax through the letting of residential property in the UK or abroad, to bring their tax affairs up to date and secure more favourable penalty terms, if indeed a penalty is applicable.
Unlike previous campaigns, there is no disclosure ‘window’ requiring a person to disclose what they owe by a specific date.
HMRC is currently ramping up its targeted compliance activity across all landlord types and will start to identify and write to landlords who they consider may not have made a full declaration of all their rental income. They will do this by comparing the information they hold about an individual’s tax history and using their powers to obtain detailed information about payments made to and from landlords.
Who can use it?
Only those who rent out residential property can use the opportunity. This includes:
– those with multiple properties
– landlords who own a single property
– specialist landlords with student or workforce rentals
– holiday lettings
– renting out a room in your main home for more than the Rent-a-Room Scheme threshold
– those who live abroad or intend to live abroad for more than 6 months and rent out a UK property
Who can’t use it?
Landlords who let out commercial property, i.e., non-residential, such as a shop, garage or lock up, are prevented from using the campaign as are companies or trusts.
Those who were eligible for any past HMRC disclosure opportunity and didn’t take advantage of such will find it difficult to use this one.
An individual who has received a notification from HMRC of their intention to open an enquiry/compliance check before that person has signalled their intent to submit a disclosure under the campaign is unlikely to be accepted. In these circumstances, taxpayers need to tell the HMRC office conducting the enquiry that they want to disclose their tax arrears.
Why use it?
Those who make a full and voluntary disclosure of all unpaid liabilities can expect a lower penalty than HMRC would otherwise seek if they raised an enquiry or compliance check without the disclosure.
At this point, individuals do not need to provide details of their undisclosed income or the tax arrears. Notification is by way of completion of the DDS form. HMRC will then write to the person to advise of their unique Disclosure Reference Number (DRN) and Payment Reference Number (PRN).
As soon as a person receives their DRN, they must make their disclosure within 90 days of the notification acknowledgement. At the same time the disclosure is made, that person must also pay the tax they have calculated on the net rental income. This must also include the interest that the taxpayer has to calculate by reference to HMRC’s calculator.
If the landlord has made a loss, then no disclosure is necessary, but they will need to amend their tax return to enable them to claim the necessary loss relief.
It is a condition of using the Let Property Campaign that a person makes an offer for the full amount of everything they owe. The offer, together with HMRC’s acceptance letter, creates a legally binding contract between the taxpayer and HMRC. The letters of offer are included in the disclosure forms.
A condition of taking part in the campaign is that all previously undeclared income is included in the disclosure as well as the letting income. This may include:
– untaxed earned income, e.g., profits from a business
– untaxed investment income, e.g., interest
– net income from non-residential property or land rental etc
– capital gains made on disposal of assets
The following tax liabilities, however, cannot be included in a disclosure:
– Trust income or income arising during a period of administration
A person can indicate on the disclosure that they need to resolve such issues and their details will be passed on to the appropriate department within HMRC.