Rented Property? Declare it Properly

31 October 2014

HMRC is ramping up the pressure on landlords who do not declare their rental income by administering a hefty nudge.

We’ve written before about HMRC’s campaign to identify and encourage property owners who have not been disclosing their income from property on their tax returns when HMRC’s campaign started around a year ago. The incentive for HMRC is to herd into the tax system recalcitrant landlords, of whom it is estimated there may be tens of thousands and who are each avoiding annual tax bills, possibly of £1,000 or more.

Now HMRC is writing to taxpayers about whom it has suspicions to come clean and report any omitted income. The letters are not enquiry notices, but carry the threat that an enquiry may be opened into the taxpayer’s affairs if information is not forthcoming. The incentive for taxpayers is that penalties are lower if a voluntary, but prompted, disclosure is made than would be the case if an enquiry is opened and tax is found to be due.

The basis of HMRC’s suspicions is likely to be information gleaned from one or more sources and collated in the HMRC’s increasingly sophisticated database. The type of data that HMRC is using includes that obtained from looking at social media and seeing who has houses or rooms to let, information disclosed by letting agents and even tracking housing benefit payments that have been made direct to landlords. So, if you have been economical with the facts as regards rental income on your tax return, now is the time to consider your options and, if you are the recipient of one of HMRC’s letters, you need to act quickly.

That said, not all of the information that HMRC has may be accurate and each taxpayer’s circumstances may require review to ascertain the true position and understand why HMRC’s suspicions may be unfounded. If HMRC was sure of all its facts, then why bother with a warning letter, why not go straight to the enquiry stage and collect the tax due?

If you receive a letter from HMRC, don’t panic, but seek professional advice promptly. If you have not omitted any income from your returns, you may need defending against HMRC’s allegations and, if there has been an unfortunate oversight on your part, you’ll need help to make a disclosure to HMRC and to not expose yourself to more penalties than necessary.

If you’d like to discuss any disclosures to HMRC or any unwanted correspondence from HMRC on the subject, please contact John Sheehan from our Letchworth office or a tax adviser at your nearest location.  Alternatively, you can complete our online contact form.