HMRC continues to target rental properties

HMRC’s Let Property Campaign continues to target taxpayers it believes have failed to declare property income from buy-to-let or rental properties. It is still issuing ‘nudge letters’ in an attempt to prompt those affected to review their tax affairs. In some cases, HMRC may open an enquiry, rather than send a nudge letter.

The Let Property Campaign is a long-standing project which utilises information HMRC has on property ownership. This information includes the date of purchase, the purchase price and, most importantly, the details of the purchaser. The information is easily cross-checked against self-assessment records of the property owners to identify those who may have failed to declare the property income to HMRC.

If you have a second property which has generated taxable profits that you have not declared, it is only a matter of time before your property is cross-checked and a nudge letter is issued to you in the post.

Further, where a rental or a second property is sold, there may well be a capital gains tax liability. HMRC is also checking whether disposals have been declared. Even if a second property is not let, there may well be capital gains tax on any increase in value.

What are the property income and gains rules?
First and foremost, if your property generates taxable profits then you must notify HMRC. You will likely be required to declare the property income on self-assessment returns, however, if your property income is low enough, then you may be able to pay the tax through your tax code, or not be required to pay any tax at all.

If a second property is sold, then any gain (increase in value between purchase and sale price) will usually be subject to capital gains tax, subject to any reliefs and exemptions that are available.

Over the years many people became ‘accidental’ landlords, often because they moved, but could not sell their old home, inherited a property, or moved in with a partner but retained their old property and rented it out. We have seen many cases where, in these circumstances, individuals have simply been unaware of their responsibilities in relation to tax. However, it is possible to bring your affairs up to date and it is very important to do so.

What do I do if I receive a nudge letter?
Before responding to a nudge letter, it is best to seek professional advice. In most cases, those receiving a nudge letter will have income to disclose to HMRC and tax to pay. However, this is not always the case, which is why it is important to review your tax position fully in the first instance.

We have a team of highly experienced ex-HMRC inspectors who can review your circumstances, calculate any tax that may be due and provide specialist advice on your tax affairs. We can deal with HMRC on your behalf, support you through the process and help correct your tax affairs quickly and efficiently.

Be proactive!
If you have not already received a nudge letter in the post, then waiting to receive one before disclosing your property income will only lead to a higher penalty. By disclosing your property income before receiving a nudge letter, you can reduce the rate of penalty which may apply.

Whether you have received a nudge letter, or believe that you have property income that you may have failed to declare to HMRC, we can help resolve your situation with HMRC. We’ve dealt with many property disclosures and enquiries over the years, from the simple to the extremely complex and we can guide you through the process for the best possible result and peace of mind.

If you have any questions about nudge letters, or have any tax issues in general, please get in touch on 0203 675 8122 or email liam.chalmers@intaxltd.com.