Rental disclosures – coming clean about undeclared income
Many landlords are unaware that they need to declare rental income and could be setting themselves up for hefty interest and penalties in the future if they don’t take any action.
HMRC ‘s ‘Let Property Campaign’ encourages individual landlords (letting out residential property) to disclose previously undeclared income. As the scheme is voluntary, individuals who are found to owe tax are dealt with more leniently than if a discovery were made as part of an HMRC enquiry.
Digitally, HMRC is now receiving more information from third party sources such as The Land Registry which identifies owners of multiple properties. Anyone with undeclared income is therefore more likely to be discovered by HMRC in the future.
Why are many landlords failing to declare their full income?
Fear factor and confusion over the rules appear to be the main reasons for under-declaring income.
Some landlords have let the situation build up over many years and others are overwhelmed by the myriad of tax rules around mortgage interest relief and tax allowances. In most cases, there is no deliberate attempt to hide income or commit fraud. Furthermore, the availability of tax reliefs such as ‘Rent a Room’ and ‘Property Allowance’ have left many to assume their rental profits are covered by these reliefs, without checking if they qualify.
Rental disclosures – what can be done?
For undisclosed income going back more than a couple of tax years, the Let Property Campaign allows landlords to declare previously undisclosed income (in full, not just rental) for up to the last 20 years. Payment of tax, interest and penalties should be made at the same time and making any declaration. For newer sources of property income, it can be declared on current Self Assessment Tax Returns and via amendments to the previous Self Assessment Tax Return.
What if a loss is made?
Even if a loss is made, the income should be declared to enable the loss to be carried forward and offset against future rental profits.
How we can help you
Bringing your tax affairs up to date can be done as a stand-alone exercise and we are experienced in dealing with HMRC in tax disclosure matters.
If you would like a confidential discussion about how we can help you, please get in touch. [email protected] or call 01527 558539.
To find out about our other services and how Curo can help your business, please see our website.