What are the property income and gains rules?
First and foremost, if your property generates taxable profits then you must notify HMRC.
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.
Why have I received an HMRC nudge letter?
HMRC receives details of property purchases and property sales, as well as details of rental payments, from multiple sources.
HMRC then checks this data against individuals’ tax returns and, if the income or gains have not been declared, then HMRC will issue a nudge letter inviting taxpayers to explain their position.
In some cases, HMRC will use the data to begin an Enquiry or a Criminal Investigation and, in such circumstances, you will not be invited to use the Let Property Campaign opportunity.
What should I do if I receive an HMRC nudge letter?
You should seek professional advice from a specialist adviser such as inTAX, as if you do not respond to the nudge letter, then HMRC may begin an Enquiry and any tax liability they identify as being due is likely to suffer a higher penalty.
If you do have tax to pay, then you should notify HMRC promptly in response to their letter.
What is the Let Property Campaign process?
An individual in receipt of income from single or multiple rentals, student lettings or holiday lettings can notify HMRC that they will use the Let Property Campaign and they will then have 90 days to calculate and pay any taxes owing.
HMRC will expect you to calculate the tax due, so using expert advice will ensure you claim the correct allowable expenditure and achieve the best outcome in your circumstances.
Will I pay a penalty as well as tax under the Let Property Campaign?
For any deliberate errors, then yes a penalty will be payable. The amount depends on your behaviour and your level of co-operation.
HMRC can seek tax and penalties going back 4 years, 6 years or 20 years depending on whether the error was innocent, careless or deliberate and, as this is a complex issue, then professional help from a specialist adviser like inTAX should be taken in all but the most straightforward cases.
