HMRC Cracking Down on Undisclosed Property Income

HMRC’s Let Property Campaign aims to give landlords with undisclosed property income a chance to get their tax affairs up to date in a simple way whilst taking advantage of the best possible terms.

The Let Property Campaign

A general premise of our penalty system is that penalties for underpaid tax are lower for those who disclose their income to HMRC. If HMRC discover an underpayment, penalties are likely to be higher. The Let Property Campaign allows landlords to notify HMRC that they intend to disclose property income. They then have 90 days to work out and pay what they owe.

Who’s eligible?

The scheme is available to most residential property landlords with undisclosed taxes. It is not available to landlords letting out non-residential property.

Benefits

Penalties are calculated as a percentage of the underpaid tax. The percentage can be reduced if the taxpayer discloses the underpayment to HMRC. By using this scheme, the disclosure reductions will apply, although HMRC will not allow the full disclosure reductions if you have taken a ‘significant’ amount of time to correct your tax affairs.

How the scheme works

The scheme has 2 stages: ‘Notify’ and ‘Disclose’.

Notify

At this stage, you only need to tell HMRC that you will be making a disclosure. You or your agent can do this by using Form COMP1. Once this is done, HMRC will write to tell you your ‘Unique Disclosure Reference Number’ and your payment reference.

Disclose

You must then calculate the undisclosed rental income and how much tax is due on it. One of the conditions of the Let Property Scheme is that you must declare any other undisclosed income, such as trade profits or dividends, at the same time as declaring the property income. To make your disclosure, you have 90 days from the date of HMRC’s acknowledgment of your notification. You must also pay the tax due in the same timeframe.

For which tax years should you disclose income?

How many years to include in your disclosure depends on when you started to receive the undisclosed property income and whether the errors you made were deliberate, careless or in spite of taking reasonable care.

If you registered for self assessment by the appropriate deadline but made a mistake in spite of taking reasonable care, you should disclose income for the 4 tax years prior to the current one. HMRC say that they do not expect many taxpayers using the scheme to fall into this category.

If you registered for self assessment by the appropriate deadline but made a careless mistake, you should disclose income for the 6 tax years prior to the current one.

If you deliberately misled HMRC about your income, HMRC may assess income for up to 20 years.

If you have undisclosed income

Please speak to us about how we can compile detailed, accurate records to disclose to HMRC. We can also advise on how to calculate any penalties that may be due.

Further information 

Details of HMRC’s Let Property Campaign can be found here: https://www.gov.uk/government/publications/let-property-campaign-your-guide-to-making-a-disclosure/let-property-campaign-your-guide-to-making-a-disclosure#about-the-let-property-campaign