As part of its Let Property Campaign, HMRC has recently released a list of ten of the most common errors people make when letting property that can lead to them being found non-compliant.
The examples quoted by HMRC are common situations where people may not even appreciate they have to declare anything for tax purposes, or where they mistakenly believe their taxable income is nil. They include the following situations:
- Where people are letting out an inherited property and do not realise the profits are taxable.
- Those collecting rent from flat mates in a student flat where agreements are informal and they assume the rent is not taxable.
- Landlords letting out property where the rent covers the mortgage payments but the taxpayer does appreciate that only the interest element of the payment is deductible for tax purposes.
- Joint owners declaring allowable expenses for a rental property on the tax return of the highest earner.
- Individuals failing to check tax implications of renting out a home while overseas with the armed forces; and
- Those failing to declare profits from renting out a property that they lived in before moving in with a partner or properties shared under divorce agreements, or properties rented out after relocating or moving into a care home.
HMRC advise their Let Property Campaign gives people an opportunity to bring their tax affairs up to date if they are individual landlords letting out residential property in the UK or abroad and to get the best possible terms to pay the tax owed.
Participation in the campaign involves telling HM Revenue and Customs (HMRC) about the income you have not declared by making a voluntary disclosure and informing them you wish to take part in the campaign. You would then have 90 days to calculate and pay any tax you owe.
You are unable to use this scheme to declare undisclosed income if you’re a company or a trust renting out residential property or if you are renting out commercial property.
HMRC is targeting tax evasion by residential landlords and advise they will use information they have about property rental in the UK and abroad and other information they hold on customers to identify people who might not have paid what they owe. They state those who do not make a voluntary disclosure now could get higher penalties or face criminal prosecution.
If you require further assistance with this or any other tax matter, please telephone 01573 224391 or email email@example.com.
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