Meg Saksida outlines the advantages and details of an ongoing HMRC campaign.
If you are a landlord situated either in the UK or overseas and let a residential property in the UK, you are liable to UK income tax on the profits generated from this activity.
If the income has not been disclosed to HMRC, its let property campaign potentially allows you to get up-to-date with your filing requirements in a simple way, and on more favourable terms than would normally be offered.
When might you need the let property campaign?
It may be that the landlord did not realise that they needed to declare the income to HMRC. Perhaps they were a non-UK resident and a member of the HMRC ‘Non-resident landlord scheme’ and they wrongly thought that membership meant that a declaration of the income was not required.
On the flip side, the landlord could have been a UK resident with a property being let overseas, and they may have wrongly thought that as overseas income it would not be chargeable to UK tax. In the case of a resident landlord with property in the UK, it may be that the landlord lets several properties and had forgotten that one of them had not been declared. Perhaps it was a holiday let or letting out a room in your own home netting more income than is allowed for the rent-a-room scheme?
Whatever the reason, and however innocent or deliberate the omission, the let property campaign is able to help.
How does the let property campaign help?
This ongoing campaign, without a specific disclosure window, allows taxpayers to ‘come forward’ and declare any undisclosed let income. By declaring through the campaign, the taxpayer has the advantage of lower penalties. Furthermore, disclosure eliminates the risk of being subject to an HMRC enquiry if the omission is later discovered by HMRC.
Taxpayers who have deliberately withheld the income will receive higher penalties through the campaign then those who have made a simple mistake; but irrespective of the reason, be it a misunderstanding or deliberate avoidance, the outcome will be much more lenient if the disclosure is made through the campaign.
One other way the campaign helps is where individuals have a good relationship already with HMRC and are usually on time and correct with their self-assessment returns, and the omission was a genuine oversight. These taxpayers will only have to pay the undisclosed income going back six years rather than the (up to) 20 years that HMRC may go back by law.
How does the campaign work?
The taxpayer should notify HMRC they wish to use the campaign and disclose the level of the non-declared income alongside the penalty they believe is appropriate that they should have to pay. If (for example) the taxpayer feels there is a good reason for the omission, they would need to explain and justify why they should receive no penalty.
If the resulting taxation and penalties cause hardship for the taxpayer, and they cannot afford to pay the tax and the penalties all at once, the scheme allows the possibility to spread payments.
Do I have to use the campaign?
A taxpayer can still disclose outside the let property campaign.
The difference is that anyone disclosing outside the scheme will not have the more favourable terms offered inside the campaign; and in serious cases, in addition to being able to go back and reclaim tax and penalties for 20 years, HMRC may open a criminal investigation.
If the property is owned jointly with a spouse or civil partner, both spouses or civil partners will need to individually declare their income under the campaign.