Safe as Houses?
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- Parkers Accountants and Chartered Tax Advisers
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HMRC are still operating the Let Property Campaign which allows individuals with undeclared income from property to make a disclosure on favourable penalty terms.
The campaign has been running for some time and Parkers Accountants and Chartered Tax Advisers confirmed with HMRC recently that the campaign does not yet have an end date scheduled.
This is a real opportunity for those taxpayers with income to declare to do so on favourable terms with a reduced risk of penalty.
Should I bother if my expenses exceed my income?
That depends. The key is to understand that just because your total cash outgoings are higher than the total cash incoming on a property you are not necessarily making a loss for tax purposes.
Not all expenses are deductible from property income, the most common of which would be the "capital" part of your monthly repayments; only the interest is allowable.
Summer Budget 2015 also announced the restriction of the deductibility of interest expenses against income tax. When those provisions are phased in over the coming years there are likely to be many more individuals with additional taxable income.
Even if you are making losses now, it makes sense to have accounts prepared and those losses documented as they will (unless the rules change) be able to be offset against future taxable profits.
I don't want to disclose my income, they'll never find out!
In that case, good luck to you. Chances are, HMRC already know and have not written to you yet due to the sheer volume of cases.
Properties are registered at the Land Registry which HMRC of course have access to. If you're named on two properties it is not unreasonable for HMRC to then assume you may have income from let properties.
Further, HMRC's latest tool, Connect, has probably already compiled the data. In the near future there are plans to expand Connect to enable query of taxpayers' bank transactions. See our article on Connect.
So what's the benefit?
As with any undeclared income and taxes, approaching HMRC before they approach you puts you in a significantly better position for negotiating on penalties. The campaign limits penalties to between 10% and 35% which compares with penalties up to 100% outside of the campaign.
It's important to recognise that this campaign does not have a statutory footing. If HMRC approach you about undeclared property income you might find the door closed to these favourable terms.
What can Parkers Accountants do for me?
Disclosure of undeclared income is a sensitive subject. In deciding on penalties HMRC will consider a taxpayer's actions, the duration of the default, the quality of disclosure made and the level of work HMRC had to put in. Emotive arguments and pleas are unlikely to be considered by HMRC in arriving at any penalties.
Indeed, appointing a professional adviser may save you money in the sense that a lower penalty will be charged. Parkers Accountants and Chartered Tax Advisers can represent you throughout the process. If you have any concerns or would like to have a no obligation discussion please contact us. Visit www.parkerstax.com for our details.