Property taxes and rental income can be complex, and mistakes can happen. You may discover that income hasn’t been declared or that profits were underreported in past years. If so, it's important to get your tax affairs in order. And if HMRC has already started an investigation, it helps to have support when responding to them.
When it comes to tax issues, the two main situations are:
Tax disclosures
Tax investigations
With over 10 years of experience handling both for property investors and businesses, our team is well-placed to assist. In this issue of Blue Bricks Magazine, we’ll focus on tax disclosures. This case study illustrates how we helped a client in this situation, and we hope it provides valuable insight to avoid or resolve similar issues.
Case Study – Voluntary Tax Disclosure / Let Property CampaignProblem – Undeclared Rental Income
Our client received a letter from HMRC stating that they suspected they may have received income from letting property that had not been declared. On this occasion, HMRC offered the client the option of making a voluntary disclosure under the Let Property Campaign.
The Let Property Campaign is an initiative from HMRC that allows landlords to voluntarily disclose any rental income they've missed declaring in the past. If you come forward through this campaign, you may avoid or reduce penalties compared to if HMRC finds the issue themselves. It's a way for landlords to get their tax affairs in order without facing more severe consequences.
The client had been letting a property for several years and had not realised that this income had to be reported annually on their Self Assessment tax return.Often, by the time a client realises that they should have filed, they do not know how to bring this up to date and are worried about how to approach HMRC with this information.
Solution – Let Property CampaignThe first step was to notify HMRC that our client wished to make a voluntary tax disclosure, providing very basic information with no dates or amounts at this stage.HMRC then wrote to confirm that they had been accepted into the Let Property Campaign disclosure facility.
From the date of this acceptance letter, HMRC always gives 90 days to make a disclosure and to settle any tax liabilities. If full payment is not possible within 90 days, HMRC can enter discussions on Time to Pay arrangements once all the figures have been agreed.
Once the disclosure submission was made to HMRC, they reviewed it and came back to us with some queries. We discussed these with our client and provided a response to HMRC.
Outcome – Tax Affairs Brought Up To DateWe guided our client through the Let Property Campaign disclosure process from beginning to end within the 90-day deadline.
HMRC agreed and accepted the tax years to be disclosed, along with our calculations of tax, interest, and penalties.
The client received a letter from HMRC confirming that they had accepted their disclosure to bring their backdated tax affairs up to date.
To ensure that they do not fall behind again in the future, our client continues to use our tax compliance services to ensure their ongoing filing requirements are met with HMRC.The key to any backdated tax issue is to be proactive and seek advice when it’s needed.
Here to Help You
As the old saying goes, prevention is better than cure. We find that it is better to work with clients from the start so we can help them avoid situations like this.
If the client hadn’t had the support of an accountant experienced in dealing with similar cases, they could have faced a large fine or additional late payment fees.
Working with the right accountant is about more than getting your year-end filings in on time. It’s about having a solid member of your team who can help you avoid legal issues, save money, and navigate sticky situations.
If we can help you with any of your property needs, contact the team for a confidential conversation using the details below.
Website: www.Equatas.co.uk
Tel: 0808 169 9090
Email: enquiries@Equatas.co.uk
