The Let Property Campaign is a program designed for residential property landlords who need to update their tax records. It provides individuals with a straightforward way to declare any previously undisclosed income from past tax years.
How HMRC Gathers Data?
HMRC gathers data from various sources related to rental properties, such as letting agents, land registries, council records, mortgage applications, and tips from the public. HMRC identify and contact landlords who may have not reported all their rental income data and paid tax.
HMRC frequently contacts taxpayers, inviting them to utilise the Let Property Campaign to rectify their tax affairs.
Who can use the Let Property Campaign?
Taxpayers who wish to update their tax records can proactively request to participate in the Let Property Campaign before HMRC contacts them. Voluntarily disclosing your tax information is highly recommended, as it can lead to reduced penalties and faster issue resolution.
The Let Property Campaign is open to various types of residential property landlords, including:
- Landlords with one or more residential rental properties in the UK or overseas.
- Individuals who rent rooms in their primary residence under the Rent a Room Scheme.
- Landlords specialising in property rentals for students, workforces, and similar groups.
- Landlords with holiday rentals.
Who can’t use the Let Property Campaign?
It is important to note that the Let Property Campaign cannot be used to declare rental profits from commercial properties like shops, garages, and lock-ups unless there are also disclosures to make regarding residential property. The program is not available for disclosures on behalf of companies or trusts that own residential property. Commercial landlords, directors, and trustees have alternative disclosure methods.
If multiple landlords Jointly Own a Property, they cannot make a single disclosure. Each owner must make separate disclosures for their share of the profit if it hasn’t already been declared to HMRC.
What are the steps to be followed for Let Property Campaign?
Here are some tips that you can adhere to ensure Payroll Compliance in the UK:
- Inform HMRC of your intention to participate in the Let Property Campaign, especially if HMRC has not already contacted you about it. HMRC will then provide you with a reference number.
- Within 90 days of receiving the reference number, quantify all previously undisclosed income and gains for the years that HMRC can still assess. This includes any undisclosed income and gains such as business profits and investment income, in addition to rental income and gains.
- Calculate the additional tax, interest, and penalties due for each tax year covered by the disclosure.
- Make a formal offer to HMRC to settle the tax, interest, and penalties in ‘full and final settlement’ of your historical tax position.
- Use your Payment Reference Number to pay the offered amount to HMRC.
- Submit your calculations and offer to HMRC, along with a comprehensive disclosure of the relevant facts and assumptions.
- Upon submitting your disclosure, HMRC will typically send an acknowledgment letter within two weeks. HMRC will then conduct internal checks and issue a formal acceptance letter if they are satisfied with the full disclosure. Alternatively, HMRC may ask questions to verify the accuracy of your disclosure.
- Going forward, ensure you remain compliant with your current and future tax affairs by registering for Self-Assessment (if not already done) and reporting all income and gains in your annual tax returns.
While these steps can be completed with adequate preparation, it’s crucial to be aware of technical rules and explore potential arguments to minimise the number of years to include and reduce penalties.Seeking advice from an experienced practitioner is advisable to ensure your disclosure is submitted correctly.
Dive into article on “Let Property Campaign- Tax Errors When Renting Out Property”. Get the insights you need to ensure your property rental is tax-efficient and compliant.
How many Years will be Included?
The number of assessable years depends on the nature of the tax issue.
If you deliberately omitted income or gains from your tax returns, there is a risk of prosecution. It’s advisable to seek professional advice to discuss your options. An alternative disclosure route, the Contractual Disclosure Facility, offers immunity from prosecution.
What will happen if I do not have longer historical records?
If you no longer have your historical records, make efforts to obtain copies of the necessary information for accurate profit and loss calculations. In the absence of information, reasonable assumptions can be used to quantify undisclosed income and gains.
How is tax calculated?
Tax should be calculated on previously undeclared profits using the appropriate rates and allowances for each tax year in question.
Rental Income Tax Calculator
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The tax rates depend on how much income you earned above the tax-free personal allowance, if applicable. It is recommended to ensure you submit your disclosure correctly and claim all available reliefs.
How much Penalty do I owe?
Penalty rates vary based on your circumstances and are generally lower for voluntary and high-quality disclosures. The penalty levels also differ if you submitted inaccurate returns to HMRC or have never previously submitted returns.
HMRC offers reductions in penalties based on the quality of the disclosure and the taxpayer’s cooperation in quantifying the correct tax position, often referred to as ‘telling/helping/giving.’
Let Property Campaign’s (LPC) Penalty Calculator
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What will happen, if HMRC disagrees with my Disclosure?
HMRC has the right to review disclosures for accuracy and challenge assumptions used. They may request to see underlying records to verify the figures included in the disclosure.
If there is a disagreement on the final amount due, HMRC may issue assessments for tax and penalties they believe are owed. Taxpayers have the right to appeal these assessments.
If an appeal is unsuccessful, alternative dispute resolution methods can be explored, including requesting an internal review or using the Tax Tribunal to make a final decision.
