HMRC recently announced that they will be commencing a campaign in an attempt to flush out previously undeclared, or under-declared, rental income and collect tax, interest and penalties arising from any such income.
We have now had experience of clients receiving a letter from HMRC inviting them to disclose any rental income not previously declared or any rental income where the amount was not correctly reported.
It is very important that such letters are taken seriously and HMRC have requested a response within 30 days of the issue of their letter.
HMRC state that they will treat any disclosure resulting from their letter as “prompted” rather than as a voluntary disclosure and as such a higher rate of penalty may be applied, calculated as a percentage of any additional tax liability arising.
If no response is made and HMRC have reason to believe that the correct amount of tax has not been paid then they may take formal action to recover the tax outstanding and this could result in even higher penalties becoming payable. In extreme situations a criminal investigation may be commenced.
For all the reasons mentioned above if you receive a letter from HMRC headed “Let Property Campaign” it is imperative that you take immediate action.
Landlords should take this opportunity to review their records to ensure that they are happy that full and accurate disclosure has been made to HMRC in their tax returns. If you have any questions on reporting rental income, or receive a letter from HMRC, please do not hesitate to contact us.
At Charter Tax we have a team of tax specialists who will be able to help you prepare your response to HMRC and guide you through the process. We can help to agree the correct position with HMRC and negotiate the settlement to include any interest or penalty that HMRC may try to apply. We can also help to resolve any misunderstanding that may have arisen particularly in connection with jointly-owned property where HMRC may not have received the whole picture before initiating an enquiry.
Disclaimer
The information provided by Charter Tax Consulting Limited is general in nature and does not constitute specific tax advice. Professional advice should be sought before deciding on a course of action, or refraining from a certain action, arising from the above information. Tax legislation changes regularly and information contained herein is provided based on legislation as at 20 October 2017.
Taxation planning concerns the application of complex statute and case law to future events. Accordingly, however expert the opinion given, it is always possible that the Courts will take a different view of the application of the law. We undertake to apply reasonable care and skill in the provision of advice. We do not guarantee that tax planning steps will in all circumstances achieve a certain legal effect.
