It is estimated that 2/3 of UK landlords have undeclared income and have not completed tax returns. In a bid to encourage landlords that are not declaring rental income, HMRC launched the Let Property Campaign in 2013.
The Let Property Campaign enables residential property landlords to notify HMRC of undisclosed income, resulting in less tax and penalties than what they would receive if HMRC prompted a disclosure. Landlords must notify HMRC online of their intent to disclose to begin their disclosure process.
HMRC nudge letters are being sent to landlords that have potentially not declared property income. A nudge letter is a suggestion from HMRC to make a disclosure under the scheme – a bit like getting a yellow card.
At Spotlight Accounting, we have been helping landlords who have yet to declare their full rental income. Through the Let Property Campaign, these individuals either responded to the nudge letter or decided to come forward voluntarily to disclose this income.
Should HMRC uncover deliberately disguised taxes during an inspection, they can impose back taxes for up to 20 years as opposed to the six years in an unprompted disclosure. Additionally, higher penalties may be imposed.
If HMRC believes a landlord is guilty of tax evasion, they may take criminal action against them.
What is the Let Property Campaign (LPC)?
The Let Property Campaign (LPC) is an opportunity for landlords to disclose unpaid taxes and get their tax affairs in order. Using the Let Property Campaign can reduce the income tax due and penalties charged for undisclosed income and taxes.
The Let Property Campaign is only available to residential property landlords, including holiday lettings. Therefore landlords renting non-residential properties, such as offices and shops, can not take advantage of the campaign. We recommend that specialist landlords with commercial property and land rentals still notify HMRC.
Both companies and individuals with undisclosed rental income from residential property can disclose unpaid taxes through the Let Property Campaign. Separate disclosures are required.
To make a disclosure under the Let Property Campaign, landlords initially need to tell HM Revenue and Customs that they intend to make a declaration under the Let Property Campaign using the digital disclosure service. HMRC will issue a disclosure reference number.
Once the disclosure reference number is issued, the landlord will have 90 days to declare and pay HMRC. In order to complete the declaration, the annual gross property income and allowable expenses will need to be calculated, as well as the unpaid tax.
It is also down to the landlord to calculate the interest and make an offer on the penalties due.
If you can not pay what you owe in a lump sum, HMRC will allow payment in instalments under certain circumstances. This does have to be arranged and agreed upon by HMRC within the 90-day limit.
HMRC will acknowledge receiving your disclosure within two weeks of receipt. Once they have checked through your disclosure, they will confirm if they have accepted your Let Property Campaign disclosure and the additional tax due.
How will this affect landlords?
The Let Property Campaign only applies to residential property. Landlords with non-residential properties are unaffected by this campaign.
According to Tax Insider, there are approximately 1 million ‘missing landlords. The Let Property Campaign is an opportunity for these landlords to get their tax affairs in order and meet their future tax obligations.
Should all landlords sign up for the scheme?
We strongly recommend landlords that who have undisclosed taxes make a declaration under the Let Property Campaign. It is a one-time opportunity to get your UK taxes in order.
HMRC have been developing systems that can analyse data to try and identify these ‘lost landlords’. With the development of technology, they have more access to more information than ever.
Data can be obtained from:
- Councils for where tenants are claiming housing benefits
- The land registry for the legal ownership of properties
- Other organisations, including letting agents
HMRC nudge letters are being issued, and a voluntary disclosure will have lower penalties. If you are not declaring property income, then you have one of two options:
- Use the Let Property Campaign and make a voluntary disclosure.
- Wait to see if HMRC investigate and suffer the consequences.
Check out our video on how the tax relief for landlords is worked out:
What happens if a landlord does not sign up for the scheme?
If you have letting income from residential property and do not make a voluntary disclosure under the Let Property Campaign, the probability of HMRC investigating your tax affairs increases yearly.
If HMRC investigates, they can backdate your tax liability of up to 20 years rather than six years in an unprompted disclosure. Should HMRC find deliberately undisclosed property rental income, they may determine this as tax evasion, for which landlords can face criminal prosecution.
How can Spotlight Accounting assist landlords?
At Spotlight, our accounting team are experienced in making Let Property Campaign disclosures. We have helped a number of landlords that have made a disclosure off their own back, having received an HMRC nudge letter.
So if you are looking for an accountant for landlords, look no further!
Spotlight can help:
- Make the initial notification of the intent to make a declaration.
- Calculate the rental profits that were not disclosed on a previous tax return. This can be done for landlords with one or multiple properties.
- Calculate unpaid tax, interest and penalties due, as well as repayable tax credits.
- Make the declaration to HMRC within the appropriate time limits.
- Deal with any HMRC enquiries as a result of the declaration.
Once a disclosure has been made to HMRC, landlords must complete a self-assessment return each tax year. Our personal tax service can help you with any future tax years.
Frequently asked questions about the Let Property Campaign
Avoid penalties and legal issues by learning more about the Let Property Campaign today. Check out our FAQs or contact us today!
Does LPC only affect residential property landlords?
Yes, the LPC only applies to landlords that rent a residential property with letting income that has not been disclosed.
How much is the HMRC penalty for the Let Property Campaign?
The amount of penalties due can’t be determined straightforwardly, as this depends on the amount of tax owed and why the tax return was not submitted or income omitted from a return. Factors such as personal circumstances may also be taken into account.
That said, the penalties will be much less than if HMRC investigates your tax affairs off their own back.
How far back can HMRC investigate rental income?
If you have made an unprompted disclosure, in most cases, HMRC can only go back six years. If HMRC has instigated an investigation into your tax affairs, then they can go back for up to 20 years.
How does HMRC find out about my undeclared rental income?
HMRC has access to various data sources, including local authorities and the land registry, which may show undeclared rental income. They also can request information from specialist landlord organisations, such as internet-based letting services and letting agents.
This data is all collated in systems that have been developed to identify these ‘lost landlords’.
Conclusion
The Let Property Campaign is a one-off opportunity to declare undisclosed residential property income from previous tax years. It allows landlords to pay what they owe and complete an annual self-assessment tax return.
If you have undeclared property rental income and owe tax on this, you risk an HMRC investigation. This could result in higher penalties and interest, as well as HMRC backdating their assessment up to 20 years instead of 6 years.
Contact Spotlight today for more information on our property tax planning services.
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