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It’s a common misconception that renting out a property doesn’t incur a tax charge.

Frequently, renting does incur tax, but just as importantly, it creates an obligation to make a return to HMRC.  In most cases, this occurs even if there is no tax payable.

Is there a remedy to fix the position?

 

Solutions

Keeping your head down and hoping for the best is not practical.

HMRC has access to increasing volumes of digitised data so trusting in hope really is hoping.  For example, HMRC regularly data match Land Registry documents with tax returns, or the absence thereof.

The Let Property Campaign (LPC) is an opportunity HMRC have made available to landlords to disclose unpaid tax through letting out residential property in the UK, or abroad, to enable the landlord to get up to date with their tax affairs.

This LPC is available to:

  • Those that have multiple properties
  • Landlords with single rentals
  • Specialist landlords with student or workforce rentals
  • Holiday lettings
  • Renting out a room in your main home for more than the Rent a Room Scheme threshold
  • Those who live abroad or intend to live abroad for more than 6 months and rent out a property in the UK.

 

Any Exclusions? 

Yes.

The LPC is not open to landlords that let out:

  • Shops
  • Garages
  • Lock ups

Generally commercial property.  Alternative routes to deal with these exist that are more business focused.

 

Shared Property

Landlords who jointly own property with another party will have to file separate disclosures.

Likewise husband and wife or civil partners will have to complete two separate disclosures.

 

Process

The LPC process is broadly the following:

  • Step 1 – Notify HMRC that a disclosure is required, HMRC will accept or reject (rejections are rare).
  • Step 2 – If HMRC accept, you have 90 days to submit a disclosure and make payment.
  • Step 3 – HMRC will either accept the disclosure or raise queries.
  • Step 4 – Once any queries are addressed, HMRC will conclude matters which can include a payment arrangement if required.

 

Costs

Tax, interest and penalties must be included in the submission.

Proactive disclosure will result in a better penalty consequence and will be much less than if HMRC identifies the deficiency first.

Provided there are no other deficiencies to correct, or at least very limited other matters, HMRC generally won’t go looking for other issues either.

Using a defined disclosure route helps keep the professional costs manageable.

Bear in mind that a deficiency often spans a number of years.  Each year may involve multiple properties and changing tenancies.

 

We have a wealth of experience dealing with LPC disclosures, including overseas property, if you need help please get in touch with Andy for help and advice.

If you cannot find the information you need on our website, please contact Andy Maxfield using our contact form or email directly to amaxfield@hwca.com

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Birmingham

Sterling House
71 Francis Road
Edgbaston
Birmingham
B16 8SP

Tel: 0121 456 1613

Leeds

Sterling House
1 Sheepscar Court
Meanwood Road
Leeds
LS7 2BB

Tel: 0113 3981100

London

New Derwent House
69 – 73 Theobalds Road
London
WC1X 8TA

Tel: 0207 025 4650