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Let Property Campaign

Disclosing income for residential property landlords.

The Let Property Campaign is a long running disclosure opportunity aimed at residential property landlords who need to bring their tax affairs up to date. It allows individuals to disclose undeclared income from previous tax years in a relatively straightforward way.

HMRC receives data from numerous sources about rental properties, including Letting agents, Land Registry, Council records, Mortgage applications and Tip-offs.

HMRC’s sophisticated Connect system has the ability to analyse data from numerous sources and flag taxpayers who do not appear to have paid the correct amount of tax. This powerful tool enables HMRC to frequently write to taxpayers and invite them to use the Let Property Campaign to bring their affairs up to date.

HMRC is targeting compliance activity across all landlord types and will identify and write to landlords who they consider may not have declared all their rental income. This will then involve HMRC carrying out compliance checks or enquiries to resolve matters and you will not then be able to make use of the opportunity offered as part of the Let Property Campaign.

Taxpayers who need to bring their affairs up to date can make a request to use the Let Property Campaign before HMRC gets in touch with them. Voluntary disclosure is strongly recommended to reduce penalties and resolve matters before they get out of hand. It may also help to convince HMRC that it was simply a mistake or careless error that led to you being behind with your tax rather than something more serious, thereby reducing the number of years to include in the voluntary disclosure.

Who can use the Let Property Campaign?

The Let Property Campaign is open to a wide range of residential property landlords including:

  • landlords with one or more UK and/or overseas residential rental properties
  • individuals renting rooms in their main home using the Rent a Room Scheme
  • landlords who specialise in property lets for students, workforces, etc
  • landlords with holiday lettings.
Who can’t use the Let Property Campaign?

The Let Property campaign can’t be used to declare rental profits in respect of commercial properties, such as shops, garages and lock-ups, unless the landlord also has disclosures to make in respect of residential property.

You can’t use the campaign if the disclosure is on behalf of a company or a Trust that owns residential property.

There are alternative ways for commercial landlords, directors and Trustees to make voluntary disclosures. Check our Tax Disclosures page.

You can’t include details for more than one person on a disclosure if property is jointly owned.  Therefore, separate disclosures will need to be made for each owner’s share of profit if they have not already been declared to HMRC. 

What happens when I use the Let Property Campaign?

There are a number of steps to follow to successfully use the Let Property Campaign.

  1. You need to tell HMRC that you want to take part in the Let Property Campaign (if HMRC has not already written to you). This can be done using HMRC’s Digital Disclosure Service, or by letter or telephone call. Your agent can also notify HMRC on your behalf. HMRC will write to you with your reference number.

    You will have 90 days from receipt of HMRC’s acknowledgement carry out the below actions.

  2. You will need to quantify all previously undisclosed income and gains for the years HMRC is still in time to assess. You should cover all previously undeclared income and gains in your disclosure, for example, business profits and investment income, as well as the rental income and gains.
  3. You will need to calculate the additional tax, interest and penalty due for each tax year covered by the disclosure.
  4. Your disclosure must include a formal offer of the tax, interest and penalty due in 'full and final settlement' of the historic tax position.
  5. You must pay HMRC the amount offered using your Payment Reference Number.
  6. You must submit your calculations and offer to HMRC, along with a full disclosure of the relevant facts and assumptions.
  7. Once you have submitted your disclosure, HMRC will send you an acknowledgement letter, usually within two weeks. HMRC will then conduct further checks internally and issue a formal acceptance letter if satisfied that a full disclosure has been made. Alternatively, HMRC might write to you to ask questions about your disclosure to check it is accurate.
  8. Going forward, you must ensure you are compliant with your current and future tax affairs by registering for Self-Assessment (if you have not done so already) and declaring all income and gains via your annual tax returns.

While these steps can be accomplished with the right level of preparation, there are a number of technical rules to be aware of as well as potential arguments to explore to try and restrict the number of years to include and minimise any penalties. Therefore, it is sensible to seek professional advice from an experienced practitioner, to ensure your disclosure is submitted on the correct basis.

How do I know how many years to include?

The number of assessable years depends on what went wrong in the first place.

If you have previously submitted tax returns, the number of years depends on the behaviour that caused the inaccuracy as follows:

  • innocent errors/ errors after taking reasonable care: four years
  • careless errors/ failure to take reasonable care: six years
  • deliberate errors: 20 years.

There is a risk of prosecution if you have deliberately omitted income/gains from your tax returns, therefore you should seek professional advice to discuss your options. There is an alternative disclosure route, the Contractual Disclosure Facility, which offers immunity from prosecution (more information can be found on our Contractual Disclosure Facility page).

If tax returns have never been submitted, this is classed as a failure to notify chargeability. The default position is that up to 20 tax years are assessable, unless you have a reasonable excuse for the failure.

If your disclosure relates to overseas profits, the assessment window is extended due to recent legislation found at Schedule 18 Finance Act (No.2) 2017.

I don’t have complete records. How do I work out my taxable profits?

If you have not retained your historic records, you must make attempts to obtain copies of the information that will enable you to accurately calculate your profits and losses. In the absence of information, you can use reasonable assumptions to quantify the undisclosed income and gains. You should explain how you have arrived at your figures in the interest of making a full disclosure. 

How do I calculate the additional tax?

You need to calculate how much tax you owe on previously undeclared profits, using the rates and allowances appropriate for each tax year in question. 

If you have already submitted tax returns declaring part of your income and/ or gains, you need to make sure that you take this into account when working out the additional tax due on the undeclared profits. 

The rates of tax you will pay depend on how much you earned above the tax free personal allowance, if you were entitled to it. If in any doubt, it is recommended you seek professional advice to ensure you submit your disclosure on the correct basis.  

How much penalty am I expected to offer?

The rate of the penalty will vary depending on your circumstances and ultimately will be lower if you make a good quality, voluntary disclosure.

If you previously submitted tax returns, the penalty is a percentage of the 'potential lost revenue' depending on the behaviour that caused the inaccuracy as follows:

  • Innocent errors/ errors after taking reasonable care: 0%
  • Careless errors/ failure to take reasonable care: 0% to 30%
  • Deliberate errors: 20% to 70%
  • Deliberate and concealed errors: 30% to 100%

If the error was careless, there is a possibility of asking HMRC to agree to suspend the penalty.

If you failed to notify HMRC that you needed to complete a tax return (usually by 5 October following the end of the tax year), the penalty is a percentage of the undeclared tax, based on the category of the failure as follows:

  • Non-deliberate failure to notify, corrected within 12 months: 0% to 30%
  • Non-deliberate failure to notify, corrected after 12 months: 10% to 30%
  • Deliberate failure to notify: 20% to 70%
  • Deliberate and concealed failure to notify: 30% to 100%

If you have a reasonable excuse for failing to notify chargeability, there is no penalty.

Unpaid tax in relation to overseas rental properties are subject to higher offshore penalties (100% to 200%) up to and including 2015/16, no matter what the reason is behind the omission, unless you have a reasonable excuse. We strongly recommend you seek professional advice to discuss whether there is the possibility to mitigate penalties in relation to offshore matters.

HMRC allows reductions to the maximum penalty in a range for the quality of the disclosure and help given by the taxpayer to quantify the correct tax position. This is sometimes referred to as 'telling/helping/giving'.

What if HMRC disagrees with my disclosure?

HMRC has the right to check your disclosure for accuracy and challenge any assumptions you have used. HMRC might also ask to see your underlying records.

If you cannot agree on the figure that is ultimately due, HMRC might issue assessments for tax and penalties it believes are due, which you have the right to appeal against. If the appeal is unsuccessful, there are other avenues such as requesting an internal review or Alternative Dispute Resolution. However, you might eventually need to ask the Tax Tribunal to make a decision. It is always advisable to seek advice from a Tax Resolutions professional if you are in dispute with HMRC. 

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How can Crowe help?

Our award winning Tax Resolutions team is experienced in advising clients on how to bring their tax affairs up to date, while ensuring HMRC applies its powers fairly. 

We can help you calculate what you owe and deal with HMRC on your behalf. We can ensure that you claim all available reliefs and help mitigate your exposure to penalties. 

We can also assist you with tax preparation services going forward to ensure that you continue to be compliant in the future. 

What if I already have an accountant?

We often work with other professional advisers to assist our mutual clients. For example, on many occasions we have been appointed by accountants who are confident preparing the computations, but unsure how many years to include and how to mitigate penalties; we can advise on the scope of the disclosure and submit the final version using your accountant’s figures.

We are also often appointed to deal with the historic disclosure in its entirety whilst the current agent continues with regular compliance work. 

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Case studies

Changing circumstances over 30 years

We were asked to prepare a disclosure under the Let Property Campaign by a husband and wife. The calculations were complex because of various structural changes over more than 30 years and they had acquired elements of it in stages, lived in part, but needed to rent other parts to cover their mortgage. Over time, the areas occupied by the clients and the parts rented changed. Having fully considered the facts and the clients’ personal circumstances, we genuinely believed that the wife had a reasonable excuse for failing to notify chargeability to HMRC and submitted a disclosure and offer accordingly.

HMRC decided to challenge strongly and demanded 20 years of past tax. Believing our position to be right, we stood firm and submitted a detailed technical analysis of the reasonable excuse and case law provisions, and how they applied to the facts of this particular case. HMRC had to agree, leading to a liability of £2,900 rather than more than ten times that figure. While that is not one of the biggest settlements we see, it was a very significant sum for this particular client.

“[We] wanted to thank you for the way you and your team helped us through the minefield of sorting out our tax liabilities over a very complex case. I always felt that there was someone knowledgeable and caring at the end of the phone - but most importantly you have a wealth of experience in tax matters which can be brought to bear in an individually-tailored way. 

This resulted in an outcome which we were very happy with and I would not hesitate to recommend Crowe to anyone wanting skilled professional input when sorting out their tax affairs.”

business people meeting

A personal touch to get the right result

We were approached by a mother and son who, for a number of years, had been in receipt of both residential and commercial rental income, income from lodgers in their own home, self-employment income and investment income. None of the income had been declared to HMRC, with no tax returns having been completed by either client. Having considered their circumstances, we advised that a disclosure under the Let Property Campaign would be the most appropriate solution.

While the disclosure itself was complicated by the fact that the clients only had partial records to confirm the income, expenditure and periods of occupancy over the years, a more significant factor was that the son suffered from severe anxiety and panic attacks. He found the entire process extremely daunting and required frequent reassurance, along with full explanations of our conclusions, the course of action proposed and what the likely consequences would be by HMRC.

The case required patience, a very personal touch and an understanding of the client’s specific needs. By providing solid technical advice and a focussed strategy throughout, it helped to earn the clients’ trust, which eased some of the stress for them. Importantly, the disclosure was accepted by HMRC without them asking any questions, which was greatly appreciated by the clients.

“[Crowe] immediately understood our issues and outlined a clear strategy to deal with the problem, demonstrating their vast experience and knowledge in the field. They explained every stage of the process to us throughout and always had a confidence and positivity that was contagious. Their compassion and knowledge always put us at ease if we were anxious on an issue. This in turn ensured we felt informed, in control and confident in completing this process.”

Call our free confidential hotline

+44 (0)800 656 9990

Contact us

Sean Wakeman
Sean Wakeman
Partner, Head of Tax Resolutions
London
John Cassidy
John Cassidy
Partner, Tax Resolutions
London