Let Property Campaign
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.
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.
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. Please check our Tax Disclosures page or call us for more information.
Multiple landlords of jointly owned property cannot make a single disclosure, therefore, separate disclosures will be needed for each owner’s share of profit (if they have not already been declared to HMRC).
There are a number of steps to follow to successfully use the Let Property Campaign.
- HMRC must be advised that you want to take part in the Let Property Campaign (if HMRC has not already written to you about it). HMRC will then issue a reference number.
HMRC allows 90 days from receipt of the reference number to carry out the actions below.
- Quantification of all previously undisclosed income and gains for the years HMRC is still in time to assess. All previously undeclared income and gains must be included in your disclosure, for example, business profits and investment income, as well as the rental income and gains.
- Calculation of the additional tax, interest and penalty due for each tax year covered by the disclosure.
- A formal offer must be made to HMRC of the tax, interest and penalty due in 'full and final settlement' of the historic tax position.
- You must pay HMRC the amount offered using your Payment Reference Number.
- Submission of calculations and offer to HMRC, along with a full disclosure of the relevant facts and assumptions.
- Once your disclosure has been submitted, HMRC will issue 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 ask questions about your disclosure to check it is accurate.
- 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.
The number of assessable years depends on what went wrong in the first place.We can discuss the background of your case with you to establish how many years need to be included in your disclosure.
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 you have not retained your historic records, attempts must be made to obtain copies of the information that will enable accurate calculations of your profits and losses. In the absence of information reasonable assumptions can be used to quantify the undisclosed income and gains. We can provide you with further guidance on how to overcome such issues and expedite settlement with HMRC.
Tax must be calculated on previously undeclared profits using the rates and allowances appropriate for each tax year in question.
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. It is recommended you seek professional advice to ensure you submit your disclosure on the correct basis and claim all available reliefs.
The rate of the penalty will vary depending on your circumstances and ultimately will be lower if your disclosure is voluntary and of good quality. The penalty levels will differ depending on if you submitted inaccurate returns to HMRC or have never previously submitted returns.
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'. We can help to mitigate your exposure to penalties.
HMRC has the right to check disclosures for accuracy and challenge any assumptions used. HMRC might also ask to see underlying records to verify the figures included in the disclosure.
If the figure that is ultimately due cannot be agreed upon, 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 therefore advisable to seek advice from a Tax Resolutions professional at the outset to minimise the risk of disagreements.
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.
Crowe’s Tax Resolutions specialists have worked with numerous clients / their agents to bring historic tax issues up to date. If you choose to work with us, you can expect the following:
- We will review the background of your case and identify all issues that need to be disclosed.
- We will advise on the most appropriate steps to ensure a full disclosure is made to HMRC to reduce the possibility of HMRC asking follow up questions.
- We will calculate the underpaid tax whilst ensuring all legitimate claims for tax relief / allowances are taken into account.
- We will act as a buffer between you and HMRC so that you do not need to speak directly with HMRC.
- We will ensure that HMRC does not overstep the mark, for example, by making requests for data that it is not entitled to.
- We will advise you on the likely penalty position and consider all mitigating factors to reduce penalties as low as possible.
- We will liaise with third parties to obtain the data that is relevant to your disclosure.
- We can assist you with your ongoing tax returns if you wish to appoint us as your tax compliance agent.
Since the beginning of 2019, our statistics show that, while it is not always possible to mitigate penalties altogether, we have helped our clients across the board to reduce penalties to a fraction of the average maximum penalty initially faced (as a percentage of the underpaid tax). We have also successfully argued reasonable excuse on numerous occasions, which has resulted in HMRC accepting that no penalty is due in appropriate cases.
Our team is accessible and approachable, and ready to answer your questions, giving you the confidence you need when dealing with a sensitive issue such as an HMRC enquiry or voluntary disclosure.
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 your accountant on the scope of the disclosure and submit the final version using your accountant’s figures.
Alternatively, we can be appointed to deal with the historic disclosure in its entirety, whilst your current agent continues with regular compliance work.
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.”
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.”
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