Let Property Tax Guidance: Unpacking the Dreaded Brown Envelope

Let property Campaign Guidance
Unpacking the dreaded brown envelope

What is the Let Property Campaign?

Did you receive a letter from HMRC recently? You’re not alone.

HMRC is conducting a rigorous campaign against Property Tax non-compliance.

Disclose any undeclared Property Tax now to avoid heavy penalties and interest later.

Why Did I Get a Letter From HMRC?

If you’ve recently received a letter from HMRC regarding undisclosed rental income, you’re not alone. HMRC is stepping up their Let Property Campaign and clamping down on undeclared Property Tax. With an estimated 1.5 million landlords in the UK underpaying taxes, many more are likely to be caught up in this campaign.

Around 7% of all UK landlords fall into a category called ‘accidental landlords.’ These are people who have come into owning a rental property unintentionally. For example, they may have inherited property. Along with other independent landlords, they may be among the most likely to receive this unwelcome correspondence.

The HMRC Let Property Campaign provides an opportunity for landlords to get up to date with tax obligations with minimal consequences. If you have received this daunting letter, you must contact HMRC to provide them with the information they’ve requested.

You must let them know:

  • If you have never rented out a property
  • If you have already declared all your income from letting
  • If you have any undisclosed income from letting

The terms of the Let Property Campaign are very favourable.

If you’re managing your rental income alone, without help from an accountant, it can be easy to make a mistake when filing your taxes. The Let Property Campaign takes this into consideration with a tiered penalty system. So, if you’ve made any errors, now is the time to rectify them.

How Does the HMRC Let Property Campaign Work?

Fortunately, it isn’t all doom and gloom. With some Let Property Campaign guidance, you can complete the process and be better off for it in the long term.

Although it’s understandable to be feeling anxious upon reading the letter, this is a fantastic opportunity to rectify any past mistakes and move forward with confidence in your lettings.

However, the process relies heavily on your being able to produce evidence. You are expected to keep all records for at least 6 years and to be able to produce these when asked.

Record-keeping can be tricky, especially if you manage your accounts yourself. The Let Property Campaign process is often much easier for those who have their accounts managed by a professional accountant.

If you don’t have an accountant, it is likely in your best interest to hire one to manage your business affairs for you before initiating the Let Property Campaign process so they can manage everything on your behalf.

The process can be broken down into four key stages:

  • Contacting HMRC. You inform HMRC that you intend to take part in the Let Property Campaign, or your accountant informs HMRC that they will do so on your behalf.
  • Calculating what you owe. This can be exceptionally difficult and time-consuming because it includes all taxes, duties, gains and other easily-missed details. Having an accountant can massively expedite this stage and prevent any mistakes.
  • Payment. HMRC prefers payment to be made in one lump sum, however, this isn’t always possible. An experienced accountant will be most effective at negotiating alternative payment plans and reduced penalties.
  • If HMRC have any further questions, they will contact you (or your accountant). If not, they will formally accept or reject your offer. Be aware that once HMRC accept an offer, you have entered into a legally binding contract.

Warnings about Undeclared Rental Income

You may have to pay a penalty on top of the other costs.

The amount will depend on your conduct and the reason why any income has gone undisclosed.

For example, if the undisclosed income is recent, caused by a genuine (and reasonable) mistake and you are forthcoming and helpful with the investigation, you could receive no penalty at all.

The Let Property Campaign gives you an opportunity to pay what you owe now to avoid much harsher consequences later. Acting now is most likely in your best interests.

If you do nothing, HMRC may carry out a compliance check on their own. If they uncover any undisclosed income, they will be significantly less forgiving about it than if you’re upfront and honest.

Neglecting to respond to HMRC precludes you from the lower penalties available to those who help with the check and may suggest that you have been intentionally uncooperative.

If HMRC has reason to believe that rental income has been intentionally undisclosed, they may investigate your tax history for the past 20 years.

HMRC is making a concerted effort to discover non-compliance by using Connect data mining software. This software cross-references vast quantities of information to detect financial anomalies and identify potential non-compliance.

Contacting a professional tax advisor before HMRC is key to making the process run as smoothly as possible, as an expert will be able to efficiently complete the process on your behalf.

A professional will also be more able to use their experience to negotiate better payment terms and penalties, reducing any costs you may have to pay.

Kind regards Ilyas