Around 250 non UK resident landlords voluntarily disclosed previously undeclared rental income for 2020/21 to HMRC, via their ongoing “Let Property Campaign”.
It’s not clear if all these individuals received the targeted warning letters from HMRC which prompted the disclosures, or if they chose to come forward themselves, but this represents a significant drop from 2019/20 when 390 disclosures were made by overseas landlords.
The drop in numbers could be a result of landlords becoming more compliant savvy, but HMRC suspect this may reflect the negative financial impact of the pandemic on landlords, who are either choosing not to declare rental income sources in the hope they may not be caught, or are perhaps mistakenly claiming some expenditure against rents, which may not in fact be allowable for tax.
Whatever the reason for not declaring rental income sources, it is important that landlords declare their rental profits or losses to HMRC within the required deadlines. Failure to do so, can lead to interest and severe penalties of up to 100% of the tax due. Volunteering this income, ie ahead of any HMRC prompt, will significantly reduce these penalties.
The unprecedented level of details now readily available to HMRC via Global Exchange of Information agreements really does mean there is no hiding place for UK or Overseas landlords. HMRC regularly receives copies of overseas or UK accounts directly from banks and they have full access to Tenancy Deposit schemes, enabling efficient cross checks to landlords tax returns. Any gaps in reporting can be quickly and efficiently identified.
We would always recommend that landlords seek professional, expert advice, simply to ensure they are fully tax compliant, claiming all expenditure correctly and in doing so, help minimise the risk of HMRC enquiry or potential prosecution.
We are perfectly placed to help any landlord with UK reporting and tax efficient advice. Our specialist property experts are available to help any landlord navigate the UK tax landscape, ensuring full compliance but also proactive tax mitigation strategies.
We also provide specialist advice connected to all types of HMRC Investigations, Disputes and Disclosures. Our inhouse, cross service, experienced team, can provide this bespoke advice, utilising all guidance, legislation and case law to achieve the best results possible.
If you would like to know more about this area, please get in touch with Private Client Tax Director, Lynn Gracie or your usual AAB contact.