Let Property Campaign – HMRC is reviewing landlord tax through rent deposit scheme data
Let Property Campaign is a HMRC initiative for landlords to disclose any tax owed to HMRC on residential property in the UK or abroad and obtain the best possible terms. Failure to do so could result in penalties of up to 200% of the tax due and in some cases a criminal investigation.
With HMRC having access to a wide range of third party data and subsequently the frequency of HMRC investigations into landlord’s tax affairs increasing, Alexander & Co is assisting more and more landlords and property investors to ensure that they are tax compliant, and their affairs are structured in the most tax efficient way.
HMRC Let Property Campaign nudge letters to landlords
As part of the Let Property Campaign, HMRC proactively sends out ‘nudge letters’ to landlords to ask them to confirm the status of properties they own or previously have owned and any tax on rent that may be due. This is also used to assess if Capital Gains Tax is due on the disposal of any properties.
HMRC obtain this information from a wide range of sources, sharing data with many different organisations, both in the UK and overseas. This includes cross referencing Land Registry data, to confirm ownership which can highlight time periods where a person owned more than one property (which also identifies when undeclared Capital Gains Tax may be due on the disposal of a property). More recently, HMRC has begun analysing data from rent deposit schemes, such as the DPS and the TDP.
How does the Let Property Campaign use rent deposit scheme data?
Deposits paid into rent deposit schemes typically represent five weeks rent for annual rents under £50,000 or up to six weeks where they exceed this amount. HMRC use this to calculate the annual rent due, and cross reference this with the details provided on a person’s tax return. This also highlight when a person receives rent but doesn’t submit a tax return. If there is a difference in the rent declared, or no rent is declared at all, an individual may receive a letter from HMRC requesting further information.
What action should you take if you receive a nudge letter from HMRC?
If you receive a letter from HMRC asking for information on properties you own or previously have owned, or more generally asking about income, it is important not to ignore these. Failing to reply can result in HMRC opening a formal investigation into your tax affairs. This can cover all aspects of your income, and when HMRC believe there was deliberate avoidance, the law allows HMRC to investigate back 20 years and the option to carry out criminal investigations.
In these circumstances, where additional taxes are due, higher penalties are usually charged by HMRC than those available under the Let Property Campaign. These penalties can be up to 100% of unpaid liabilities, or up to 200% where it is related to offshore income.
In many cases, the tax you have declared and paid may be correct. In these circumstances, you would simply need to reply to HMRC and confirm your circumstances. It may be worth speaking to a professional tax advisor before replying, to make sure your calculations are correct, and nothing has been missed.
Where HMRC have analysed data from deposit protection schemes, they may not be aware of any rental voids, including periods where the property was being renovated or unlet. In these cases, this should be explained to HMRC if an enquiry is made. It is important to keep accurate records to help document this.
How Alexander & Co can assist Landlords with the Let Property Campaign and other tax and accountancy issues
Alexander & Co works extensively with clients in the property sector. This includes landlords, property developers and investors as well as house builders, architects, surveyors and other professions dependent upon the sector, both UK based and overseas.
Our extensive range of services include Self Assessment tax returns with a property focus for individual landlords, structuring and reorganisation for property companies, annual accounting services and more property specific tax advice, such as Land Remuneration Tax, VAT on property acquisitions and Annual Tax on Enveloped Dwellings (ATED) to name a few.
To find out how we can assist you and become more tax efficient, please contact us at firstname.lastname@example.org or use the contact form on this page.