What is the HMRC Let Property Campaign?
The HMRC Let Property Campaign is a property Tax Amnesty run by HM Revenue and Customs. It gives individual landlords who are letting out residential property in the UK or abroad an opportunity to bring their tax affairs up to date and receive the most favourable terms on the tax that they owe. The 18 month scheme was launched by HMRC in September 2013 with the intention of recovering some of the £500 million underpaid by landlords every year. 18 months will be up in April which means that time is running out for landlords who have not yet disclosed any undeclared rental income, however there IS still time!
Landlords who owe tax on undeclared rental income can tell HMRC about it via a voluntary disclosure and as a result have their penalties reduced. Outstanding tax plus interest will still have to be paid but HMRC will be more lenient when issuing the penalty for tax evasion which includes hefty fines and possibly criminal prosecution.
Landlords wishing to take part in the Amnesty must fill in a form or call the Let Property Campaign helpline. Once they have registered their interest in taking part, landlords will then have three months to calculate and pay what they owe.
Who does the Amnesty apply to?
The scheme applies to individual landlords and cannot be used by companies or trusts.
Individual landlords can take part in the scheme if they are:
- Renting out a single property
- Renting out multiple properties
- A specialist landlord e.g. renting properties to students or offering workforce rentals
- Renting out a room in their main home where their rental income exceeds the annual threshold of £4250. This figure is the HMRC “rent a room” threshold (see section on exemptions below for more details)
- Living abroad and letting a property in the UK
- Living in the UK and letting a property abroad
- Offering holiday lets even if they use the property themselves
Are there any exemptions from property tax?
If a landlord is simply renting out a room in their own home then they should be able to do so tax-free under HMRC’s “Rent a room” scheme, providing they earn less than the threshold of £4250 per year from the rental income and the accommodation that they are letting is furnished. They can let out a room or an entire floor under this scheme.
If they earn less than the threshold of £4250 then they don’t need to do anything but if their earnings from the rental exceed the threshold then they will need to complete a tax return and opt into the scheme to claim their tax-free allowance.
To be eligible to opt into the Rent a room scheme, a landlord needs to be either:
- A resident landlord (letting out part of a property which is their only or main home), regardless of whether or not they own it
- Or, running a bed and breakfast or a guest house
NB. The scheme cannot be used for homes converted into separate flats.
How can HMRC find out about deliberate or accidental rental tax evasion?
There are 5 ways that HMRC can find out if landlords have failed to declare profits made on their property rentals. Their detection methods are as follows;-
If they use an agency to find tenants for their rental property then HMRC will know about them because agencies are required by law to submit the details of the landlords that they work with and fees.
Since 2007 there has been an authorised deposits scheme in place to protect rental deposits. HMRC have access to this information.
If they have purchased a property that they now rent out and paid stamp duty on it, then HMRC will know about it.
By using the electoral register, HMRC can establish who is living at an address. If a landlord paid the stamp duty on a property but are not the name on the electoral register for that property (and remember that you can only be registered at one address at any given time), then HMRC will spot a mismatch and investigate further.
HMRC take informants seriously on matters regarding tax evasion, even if the informant happens to be a disgruntled ex-spouse/partner or business partner.
What are the consequences of not declaring rental profit or gains from the sale of a property?
HMRC has warned property investors that they have specialist teams targeting those with undeclared rental profits or gains from sale of property. If found out, the landlord/property investor will have to pay the tax due plus interest and face hefty penalties that can amount to as much as the outstanding tax, together with the possibility of criminal prosecution.
When the Let Property Campaign was September 2013, it was the latest amnesty launch by HMRC. Others that had been running since 2007 had collected more than £800 million of unpaid tax , of which £552 million was recovered as a result of individuals making voluntary disclosures and the rest was secured via HMRC’s target teams carrying out follow up activities and criminal prosecutions. Suffice to say that HMRC are serious about recovering what is owed!
We hope that this article has been interesting and informative. If you have any queries or would like to discuss the HMRC Let Property Campaign further, please contact Sam on 0800 954 2099 for a Free Consultation or complete our online form.