The Let Property Campaign is designed to help landlords who have not declared income from residential properties, either in the UK or abroad. This campaign provides a straightforward way to update your tax records while benefiting from the most favourable terms available. If you're a landlord with undisclosed income, it's crucial to inform HM Revenue and Customs (HMRC) as soon as possible. You'll then have a 90-day window to calculate and pay your due taxes.
Who Can Benefit from This Campaign?
This campaign is open to all landlords with residential properties who haven't fully disclosed their taxes. The campaign covers various types of landlords, including:
Those with multiple properties
Single-property landlords
Landlords specializing in student or workforce rentals
Holiday property landlords
Individuals renting out a room in their primary residence above the Rent a Room Scheme threshold
Landlords living abroad for more than six months while renting out a UK property
Note: This campaign is not applicable to non-residential properties like shops, garages, or lock-ups. Also, companies and trusts cannot participate.
How to Participate
To join the Let Property Campaign, you need to:
Notify HMRC: Inform them of your intent to join the campaign.
Disclose Information: Share all previously undisclosed income, gains, tax, and duties.
Make an Offer: Propose the amount you owe.
Settle Your Dues: Pay the calculated amount.
Cooperate with HMRC: Provide any additional information if requested.
Advantages and Disadvantages of the Let Property Campaign
The Let Property Campaign is a UK government initiative that provides landlords an opportunity to disclose any undeclared income from residential property rentals. While the campaign offers several advantages, it also comes with its own set of challenges. Below, we explore the pros and cons of participating in the Let Property Campaign.
Advantages
1. Favorable Terms
The campaign offers the best possible terms for landlords to get their tax affairs in order. Lower penalties and flexible payment options make it a viable choice for those looking to disclose unpaid taxes.
2. Simplified Process
The campaign provides a straightforward way for landlords to disclose their income and pay the taxes they owe. This is particularly beneficial for those who find the regular tax system complex and daunting.
3. Reduced Penalties
One of the major benefits is the reduced penalties for those who voluntarily disclose their income. Penalties could be significantly higher if HMRC discovers the undisclosed income themselves.
4. No Fixed Deadline
Unlike previous campaigns, there is no specific deadline for disclosure, giving landlords ample time to get their affairs in order.
5. Scope of Eligibility
The campaign is open to a wide range of residential property landlords, including those with multiple properties, single rentals, and even those living abroad but renting property in the UK.
6. Payment Plans
For those unable to pay the entire tax amount upfront, the campaign offers the possibility of payment plans, depending on individual circumstances.
7. Avoidance of Legal Consequences
Voluntary disclosure through the campaign can help landlords avoid severe legal repercussions, including criminal investigations in extreme cases.
8. Future Compliance
Participating in the campaign can serve as a stepping stone for landlords to understand their tax obligations better, ensuring future compliance.
Disadvantages
1. Limited Scope
The campaign is not open to landlords who are letting out non-residential properties or those who wish to disclose income on behalf of a company or trust.
2. Complexity in Calculations
While the campaign aims to simplify the process, calculating the tax owed, especially for multiple properties or different types of income, can still be complex.
3. Risk of Higher Penalties
If landlords intend to come forward but delay, they risk higher penalties if they are subject to an HMRC enquiry before notifying their intention to disclose.
4. No Professional Advice
The campaign recommends that landlords start gathering their information as early as possible, but it does not provide individual advice on calculating the tax owed, which may necessitate hiring a tax advisor.
5. Potential for Mistakes
The onus of accurate disclosure lies on the landlord. Any errors or omissions could result in penalties, despite the campaign's more lenient terms.
6. Long-term Commitment
Once you notify HMRC of your intention to disclose, you are committed to the process. If you change your mind, you must inform HMRC, or they will take follow-up action.
The Let Property Campaign offers a valuable opportunity for landlords to regularize their tax affairs. However, it's essential to weigh the advantages and disadvantages carefully before participating. Consulting a tax advisor can provide additional insights tailored to your specific circumstances.
Who Should and Who Shouldn't Participate in the Let Property Campaign
As explained above, the Let Property Campaign is a UK government initiative designed to help landlords disclose undeclared income from residential property rentals. While the campaign offers a pathway to get tax affairs in order, it's not suitable for everyone. Below, we outline who should consider participating and who might be better off exploring other options.
Who Should Participate
1. Residential Property Landlords
If you own and rent out residential properties, this campaign is specifically designed for you. Whether you have a single property or multiple, the campaign covers a broad range of residential landlords.
2. Landlords with Undeclared Income
If you have not declared rental income in the past, this campaign offers a chance to come clean with reduced penalties.
3. Overseas Landlords
Landlords residing outside the UK but renting property within the country can also take advantage of this campaign to disclose any undeclared income.
4. Landlords with Incomplete Records
If you don't have all the necessary business records, the campaign allows you to make your best estimate for disclosure, although you may be asked to explain your calculations.
5. Those Willing to Disclose Other Liabilities
The campaign requires you to disclose all previously undeclared income, not just from property rentals. If you have other sources of income you haven't told HMRC about, this campaign allows you to include them.
6. Landlords with Rental Losses
If you have made a loss in any year, you can carry that loss forward to reduce liability on future rental profits. However, you'll still need to disclose the years where a tax liability arises.
Who Shouldn't Participate
1. Non-Residential Property Landlords
The campaign is not open to those renting out non-residential properties.
2. Companies and Trusts
If you wish to disclose income on behalf of a company or trust, this campaign is not the right avenue.
3. Those with Current Year's Income
Income earned in the current tax year should not be included in your disclosure. Instead, you'll need to register for Income Tax and report this income on a tax return.
4. Those Already Under Investigation
If you are already under an HMRC enquiry, participating in this campaign may not be advisable as you could face higher penalties.
5. Those Unwilling to Disclose All Liabilities
If you're not willing to disclose all previously undeclared income, participating in this campaign might not be beneficial.
6. Those Who Have Taken Reasonable Care
If you've been diligent about your tax affairs but still paid too little, you won't benefit much from this campaign. In such cases, you won't have to pay any penalties at all.
The Let Property Campaign offers a valuable opportunity for certain landlords to regularize their tax affairs. However, it's crucial to understand whether this campaign is the right fit for your specific circumstances. Consulting with a tax advisor can provide additional insights and help you make an informed decision.
Payment Plans
If you can't pay the entire amount at once, you may be eligible for a payment plan, depending on your circumstances.
Penalties
The penalty amount depends on the nature of your non-disclosure. If you've deliberately withheld information, the penalty will be higher than if it was an unintentional mistake. In some cases, you may not have to pay a penalty at all.
Duration of Back Taxes
If you've registered for self-assessment and made a simple mistake in your tax returns, you'll only be liable for a maximum of six years of back taxes. However, if HMRC discovers the discrepancy, they can go back up to 20 years, and you may also face a criminal investigation.
Consequences of Non-Disclosure
HMRC's Compliance Activities
HMRC is actively monitoring landlords across all categories to ensure compliance with tax obligations. If you choose not to disclose your unpaid taxes, you'll likely be identified and contacted by HMRC for compliance checks or inquiries. Once this happens, you'll lose the opportunity to benefit from the favorable terms offered by the Let Property Campaign.
Penalties for Non-Disclosure
If you're caught by HMRC without having made a voluntary disclosure, the penalties can be severe. You could face penalties up to 100% of the unpaid taxes for domestic income and up to 200% for offshore-related income. In extreme cases, criminal investigations may be initiated.
Offshore Liabilities
If your undisclosed income is from offshore properties, you can contact the Offshore Disclosure Facility Helpline for more information.
How to Notify HMRC
Initial Notification
The first step in making a disclosure is to notify HMRC of your intent. At this stage, you don't need to provide any details about the undisclosed income or the taxes you owe. You can make the notification for yourself or on behalf of someone else, such as a client if you're a tax advisor.
Digital Disclosure Service
Individuals and companies can use the Digital Disclosure Service (DDS) form to notify HMRC. Upon submission, you'll receive a unique Disclosure Reference Number (DRN) and a Payment Reference Number (PRN), which you should use for all future communications and payments related to the Let Property Campaign.
Agents and Advisors
If you're an agent or advisor, you can use the Agent form to notify HMRC on behalf of your client. You'll receive a DRN and PRN for your client, which should be used for all future interactions.
Change of Plans
If you've notified HMRC but later decide that you don't need to make a disclosure, it's crucial to inform HMRC to avoid any follow-up actions.
Making the Disclosure
Timeframe
Once you've notified HMRC, you have 90 days to make your full disclosure and payment. If you can't pay within this period, you must arrange a payment plan with HMRC before the deadline.
Disclosure Details
Tax Calculation
Once you've determined your additional rental income, you'll need to calculate the tax owed based on your income levels and personal allowance.
Preparing Your Disclosure
Calculating Your Dues
The complexity of calculating your owed taxes can vary depending on your situation. You may want to consult a tax advisor for professional guidance. HMRC recommends starting the process as early as possible to gather all necessary information and records. Below we have explained in detail how to calculate the payable tax.
Rental Income and Expenses
You'll need to determine the total rental income for each year that you haven't disclosed to HMRC. Remember, you don't need to include income you've already reported. Also, calculate the allowable expenses related to your rental income. These are costs incurred in the day-to-day management of your property.
Taxable Profit
After calculating your total rental income and allowable expenses, you'll need to subtract the expenses from the income to find out your taxable profit. Not all expenses are deductible, so make sure to consult HMRC guidelines or seek professional advice.
Tax Rates
Your Income Tax rate will depend on your total income above your Personal Allowance. Make sure to consider this while calculating the tax you owe.
Methods of Making a Disclosure
The Let Property Campaign is one of the ways you can make a disclosure to HMRC. However, it's not the only method. HMRC offers three distinct ways to make a disclosure:
Contractual Disclosure Facility (CDF): This is for those whose deliberate behavior has caused a loss to HMRC. If you enter into a CDF contract and make a complete and accurate disclosure, HMRC will not open a criminal investigation.
Coronavirus Job Retention Scheme Grant Repayments: This is for employers who have overclaimed Coronavirus Job Retention Scheme grants.
Digital Disclosure Service: This is a more general service for disclosing errors related to Income Tax, Capital Gains Tax, Inheritance Tax, Corporation Tax, and more.
Offshore Disclosures If your disclosure involves income, assets, or gains outside the UK, you should use the Worldwide disclosure facility, which is a part of the Digital disclosure service. You can make an offshore disclosure at the same time as an onshore disclosure.
Notification and Disclosure Timelines You must notify HMRC that you intend to make a disclosure as soon as you realize you owe tax. After notification, you have 90 days to make the actual disclosure and payment. If you can't pay within this period, you must make payment arrangements before submitting your disclosure.
Record-Keeping and Penalties If you haven't kept proper business records, you should start immediately. Failure to keep appropriate records can result in a penalty of up to £3,000. The penalty for deliberately misleading HMRC can be up to 100% of the tax liability if the income or gain arose in the UK and up to 200% for an offshore liability.
Tax Credits and Other Liabilities If you or your partner are receiving tax credits, you should still make a disclosure but also inform the tax credits office. Other income liabilities like investment income, income from property or land rental, and loans to directors should also be included in your disclosure.
What If You Don't Disclose?
HMRC's Approach
HMRC is increasing its compliance activities and will identify landlords who haven't declared all their rental income. If you're identified, you won't be able to take advantage of the Let Property Campaign's benefits.
Higher Penalties
HMRC will likely impose higher penalties than those available under the Let Property Campaign. Penalties can go up to 100% of the unpaid taxes for domestic income and up to 200% for offshore-related income.
Criminal Investigation
In extreme cases, HMRC may initiate a criminal investigation. This is in line with their criminal investigation policy and is usually reserved for the most severe cases of tax evasion.
How Many Years are Included in Your Disclosure to LPC?
The Let Property Campaign (LPC) requires landlords to disclose undeclared income from residential property rentals for previous tax years. The campaign does not specify a fixed number of years for which you must disclose income; instead, it is based on your individual circumstances. You are expected to disclose income for all the years you have failed to do so, and this could vary from one landlord to another.
What to Do If You Have Received a Nudge Letter from HMRC
Receiving a 'nudge letter' from HMRC indicates that they have information suggesting you may have undisclosed rental income. If you receive such a letter, it's crucial to act promptly. The first step is to read the letter carefully to understand what HMRC is asking for. You should then consider participating in the Let Property Campaign to disclose any undeclared income. Ignoring the letter could lead to an investigation, higher penalties, and potential legal repercussions.
Where Does HMRC Get Its Information About Your Property?
HMRC has various sources to gather information about your property and potential rental income. These can include public records, land registry databases, and even social media. HMRC also collaborates with other government departments and financial institutions to cross-reference information. They may also receive tips or complaints from the public. Therefore, if you have undisclosed rental income, it's likely that HMRC will eventually find out.
What If HMRC Disagrees with the Disclosed Information?
If HMRC disagrees with the information you've disclosed, they will contact you for clarification. You may be asked to provide additional evidence to support your disclosure. If after their enquiries, HMRC finds that the disclosure is materially incorrect, they may charge significantly higher penalties. In extreme cases, your case could even be considered under HMRC's Criminal Investigation Policy. Therefore, it's crucial to ensure that your disclosure is accurate and complete to avoid such complications.
Final Steps in Making a Disclosure
The 90-Day Window
After notifying HMRC of your intent to disclose, you have 90 days to complete your disclosure and make the payment. Ensure that HMRC receives both your disclosure and payment within this period. Failure to meet this deadline will result in your exclusion from the Let Property Campaign, along with the loss of any favorable terms.
Payment Arrangements
If you can't pay the full amount by the deadline, you must arrange a payment plan with HMRC. Make sure to adhere to the terms of this plan to avoid further complications.
What If You Change Your Mind?
If you've notified HMRC but later decide that a disclosure is unnecessary, you must inform HMRC immediately. Failure to do so will lead to follow-up actions from HMRC, including potential penalties and inquiries.
Disclosures for Deceased Individuals
Who Can Make a Disclosure?
If you're the personal representative or executor of a deceased individual, you can make a disclosure on their behalf. Make sure to clarify that you're acting on behalf of someone else, as HMRC may request additional evidence of your authorization.
How to Notify HMRC
You can use the Digital Disclosure Service (DDS) to notify HMRC, just like you would for a living individual. You'll receive a unique Disclosure Reference Number (DRN) and a Payment Reference Number (PRN) for the deceased individual, which should be used for all future communications and payments.
The Let Property Campaign is a valuable opportunity for landlords to come clean about their undisclosed rental income and settle their tax affairs. The campaign offers favorable terms and lower penalties for those who voluntarily disclose their income. However, failure to disclose or being caught by HMRC can result in severe penalties and even criminal investigations.
Calculating Payable Taxes Under the Let Property Campaign
Components of the Tax Calculation
1. Total Rental Income
The first step in calculating your payable taxes under the LPC is to determine your total rental income for each year you have not disclosed to HMRC. This includes all the money you've received as rent from your tenants.
2. Allowable Expenses
Once you've determined your total rental income, the next step is to calculate your allowable expenses. These are the costs you've incurred in the day-to-day running of your property. It's essential to note that you cannot claim any expenses that you've already claimed on income you've previously disclosed to HMRC.
3. Taxable Profit
After calculating your total rental income and allowable expenses, you'll need to subtract the allowable expenses from your total rental income. The result is your taxable profit.
4. Income Tax Rates
The rates of Income Tax you'll pay depend on how much income you earn above your Personal Allowance, which is an annual amount of tax-free income you're allowed to earn.
The Formula
The formula to calculate payable taxes under the Let Property Campaign can be summarized as follows:
Taxable Profit = Total Rental Income − Allowable Expenses
Payable Taxes = Taxable Profit × Applicable Income Tax Rate
Frequently Asked Questions About the Let Property Campaign
1. What is the Let Property Campaign?
The Let Property Campaign is a UK government initiative aimed at encouraging landlords with undisclosed income from residential property rentals to voluntarily disclose this income to HM Revenue and Customs (HMRC).
2. Who is eligible to participate in the Let Property Campaign?
Any landlord who has not fully disclosed income from residential property rentals is eligible. This includes landlords with multiple properties, single-property landlords, and even those renting out a room in their primary residence above the Rent a Room Scheme threshold.
3. How do I join the Let Property Campaign?
To participate, you first need to notify HMRC of your intent to disclose. After notification, you have 90 days to provide all the details of your undisclosed income and make the necessary payments.
4. What are the benefits of participating in the campaign?
The main benefit is the opportunity to settle your tax affairs under more favorable terms. You're likely to face lower penalties compared to if HMRC discovers the undisclosed income themselves.
5. What happens if I don't participate and HMRC finds out?
If HMRC identifies that you have undisclosed income, you could face severe penalties, potentially up to 100% of the unpaid taxes for domestic income and up to 200% for offshore-related income. In extreme cases, you may also face criminal investigation.
6. Can I participate if I live outside the UK but have rental income in the UK?
Yes, landlords living abroad for more than six months while renting out a UK property are eligible to participate in the Let Property Campaign.
7. What if I can't pay all the taxes at once?
If you're unable to make a full payment, you may be eligible for a payment plan. However, you must arrange this with HMRC within the 90-day disclosure period.
8. How far back do I need to disclose rental income?
If you've registered for self-assessment and made a simple mistake, you'll be liable for a maximum of six years of back taxes. However, if HMRC discovers the discrepancy, they can go back up to 20 years.
9. Can companies and trusts participate in the Let Property Campaign?
No, the campaign is not open to companies and trusts. It is designed for individual landlords.
10. What if I've already notified HMRC but decide not to disclose it?
If you've notified HMRC but later decide that you don't need to make a disclosure, it's crucial to inform HMRC to avoid any follow-up actions.
I hope these FAQs provide a comprehensive overview of the Let Property Campaign. Would you like to know more about any specific aspect?
How a Property Tax Accountant Can Help You Navigate the Let Property Campaign
The Let Property Campaign is a UK government initiative aimed at encouraging landlords to disclose any undeclared income from residential property rentals. While the campaign offers a straightforward way to settle your tax affairs, the process can be complex and daunting. This is where a property tax accountant can be invaluable. So we'll explore the various ways a property tax accountant can assist you in successfully navigating the Let Property Campaign.
Expert Guidance on Eligibility
Understanding whether you're eligible for the Let Property Campaign can be confusing. A property tax accountant can assess your situation and provide expert advice on your eligibility. They can help you determine if you meet the criteria, which includes various types of landlords, from those with multiple properties to single-property landlords.
Accurate Disclosure of Income and Expenses
One of the most critical aspects of the Let Property Campaign is the accurate disclosure of rental income and allowable expenses. A property tax accountant can help you gather all the necessary financial records, ensuring that you don't overlook any income or deductible expenses. This meticulous approach minimizes the risk of errors that could lead to penalties.
Tax Calculation and Planning
Calculating the tax owed can be a complex task, especially if you have multiple properties or different types of income. A property tax accountant can help you accurately calculate the tax you owe, taking into account your total income, personal allowances, and any reliefs you may be entitled to. They can also help you plan for the payment, offering advice on payment plans if you can't settle the amount in one go.
Navigating the 90-Day Window
After notifying HMRC of your intent to disclose, you have a 90-day window to complete your disclosure and make the payment. A property tax accountant can help you meet these deadlines by managing the process efficiently, ensuring that all paperwork is completed and submitted on time.
Minimizing Penalties
The Let Property Campaign offers more favorable terms for those who disclose voluntarily, including lower penalties. A property tax accountant can guide you through the disclosure process in a way that minimizes potential penalties. They can also negotiate with HMRC on your behalf if there are any complications or disputes.
Compliance and Future Planning
Beyond helping you with the Let Property Campaign, a property tax accountant can assist you in maintaining ongoing compliance with tax obligations. They can help you set up systems for record-keeping and tax payments, ensuring that you remain compliant in the future and avoid similar issues.
Offshore Property Income
If you have rental income from properties located outside the UK, the tax situation can become even more complicated. A property tax accountant with experience in international tax laws can provide invaluable advice on how to disclose offshore property income correctly.
Peace of Mind
Perhaps one of the most significant benefits of hiring a property tax accountant is the peace of mind it offers. Knowing that a professional is handling your tax affairs allows you to focus on other aspects of your property business, confident that you're complying with all legal obligations.
A Closer Look at Accurate Disclosure of Income and Expenses
· The Importance of Accuracy
Accurate disclosure of income and expenses is the cornerstone of a successful Let Property Campaign application. Any discrepancies or omissions can lead to penalties, increased scrutiny from HMRC, and even legal repercussions. A property tax accountant can help you avoid these pitfalls by ensuring that every pound of income and every allowable expense is accurately reported.
· Record-Keeping
One of the first steps in accurate disclosure is maintaining impeccable records. A property tax accountant can guide you on what records to keep, how to organize them, and how long they should be retained. This includes rental agreements, bank statements, invoices, and receipts for expenses related to property maintenance and management.
· Identifying Allowable Expenses
Not all expenses related to your rental property are deductible. A property tax accountant can help you identify which expenses are allowable under HMRC guidelines. These could include costs like mortgage interest, repairs, maintenance, and even certain utility bills if you're providing an all-inclusive rental.
· Verification and Cross-Checking
Before submitting your disclosure, a property tax accountant can perform a thorough review of your records to ensure that all income and expenses are correctly accounted for. This verification process can catch any errors or omissions, reducing the risk of complications down the line.
A Deep Dive into Tax Calculation and Planning
· Complexity of Tax Laws
The UK tax system can be complex, with various rates, allowances, and reliefs that apply depending on your specific circumstances. A property tax accountant can help you navigate this complexity, ensuring that you pay the correct amount of tax while taking advantage of any reliefs or allowances you're entitled to.
· Strategic Planning
Tax planning is more than just calculating what you owe for the past; it's also about planning for the future. A property tax accountant can help you develop a tax strategy that minimizes your liability over the long term. This could involve structuring your property holdings in a certain way or taking advantage of specific tax reliefs and allowances.
· Payment Plans
If you're unable to pay your tax liability in one lump sum, a property tax accountant can assist you in setting up a payment plan with HMRC. They can help you understand the terms of the plan, ensuring that it's manageable and doesn't put you in financial hardship.
· Scenario Analysis
A property tax accountant can run various scenarios to show you the tax implications of different actions. For example, what would be the tax impact of selling one property to invest in another? Or how would your tax liability change if you moved from being a sole landlord to setting up a property management company? This kind of analysis can be invaluable in making informed decisions about your property portfolio.
By ensuring accurate disclosure of income and expenses and offering expert advice on tax calculation and planning, a property tax accountant provides indispensable support throughout the Let Property Campaign process and beyond. Their expertise can save you time, money, and stress, allowing you to focus on growing your property business.
The Let Property Campaign provides a valuable opportunity for landlords to regularize their tax status. However, the process can be complex and fraught with potential pitfalls. A property tax accountant can offer expert guidance at every step, from determining eligibility and making accurate disclosures to calculating taxes and planning payments. Their assistance not only helps you navigate the campaign successfully but also sets you up for ongoing compliance, minimizing future risks.
Comments