Let Property Campaign – How we helped with a disclosure

The Let Propety Campign is for those making income from property but haven’t delcared it to HMRC. The Let Property Campaign gives you an opportunity to bring your tax affairs up to date if you’re an individual landlord letting out residential property in the UK or abroad and to get the best possible terms to pay the tax you owe.

The process of entering the Let Property Campagin involves:

1. Notification.
2. Disclosure including quantification of tax, interest and penalties.
3. Formal offer.
4. Payment of liabilities.
5. Co-operating with HMRC’s request for information

Let Property Campaign Discloure Case Study

The property was mortgage-free, and rent was paid regularly into a single bank account, the tenants were long-standing with no formal agreement in place and repairs were paid for by them.

Mrs T had moved in with her family in Bristol having suffered a fall that required full time care.  Her husband had recently passed away and she had no other family nearby who could care for her.  During her absence from her main residence, she decided to let it out, mainly so that it wasn’t standing empty and at risk of vandalism or squatters.

Mrs T had never worked, her husband had been the main bread-winner whilst she had managed the family home and raised their children.  She had no knowledge of the tax system, nor any idea that property income might need to be declared to HMRC – she was a pensioner whose annual income was teetering below the personal allowance.

It was only when she made the decision to relocate permanently to Bristol and sell the property that the issue was mentioned by a family friend.  Eager to ensure her tax affairs were up to date, Mrs T approached Edge to assist with the process of making a disclosure.

After formal engagement, the first step was for Edge to approach HMRC and notify them that Mrs T intended to disclose previously undeclared rental income.  This was done using HMRC’s Digital Disclosure Service under the Let Property Campaign.

Whilst waiting for HMRC to issue a disclosure reference and payment reference number, Mrs T provided Edge with copy bank statements from the first date of letting and details of other income received in those years (pension income).

Following HMRC’s issue of a payment reference number, Mrs T made a payment on account equal to the tax liability.  This has the effect of stopping any further late payment interest accruing.  Edge them provided Mrs T with final tax, interest, and penalty calculations and, following her approval of those figures, made the submission to HMRC.

The disclosure stated that Mrs T should not be subject to a penalty as she had a reasonable excuse – she was in her eighties, never had any knowledge of the tax system and had suffered personal health problems and bereavement which lead to her error.  Furthermore, she made a voluntary disclosure of all income sources as soon as the error came to light, included details of income and calculations of tax, she also paid the tax in full before the report had been submitted.

Whilst ignorance of the law is not a reasonable excuse for not paying the correct amount of tax, HMRC are required to stand in the shoes of the taxpayer and given Mrs T’s personal circumstances during the time of non-compliance HMRC accepted the penalty position.

Using the Let Property Campaign is unlikely to result in a criminal investigation unless:

• Activities giving rise to the omission involve crime:
  • VAT fraud
  • VAT bogus registration fraud
  • Organised tax credit fraud
  • Wider criminality
• The disclosure contains material inaccuracies.
• Details of technical positions taken are omitted with an intent to illustrate a tax advantaged position.
• Details of estimates or methodology of calculating liabilities is omitted with an intent to illustrate a tax advantaged position.
• The statement of assets is inadequate or inaccurate.
• There is a continuance of behaviour during or following the disclosure.

If earning from property we recommend you read Income tax when you rent out a property for more information and examples

If you have been making an income and not letting HMRC know

don’t bury your head in the sand the please contact us

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For up to date tax tips keep an eye on our socials Facebook Instagram and LinkedIn