Rural landlords advised to ensure tax affairs are in order

Accountants Saffery Champness are advising those who let rural houses and holiday property to take the opportunity to place their tax affairs in order as HMRC launches its latest Let Property campaign.

The campaign, which began last week, allows all landlords of let property to catch up where they have either avoided or inadvertently or deliberately not paid tax on rental profits.

HMRC has offered lower penalties to those who come forward under the Let Property campaign, rather than waiting to have HMRC start a compliance check or an investigation.

Susie Swift, a partner at Saffery Champness, and a member of the firm’s Landed Estates and Rural Business Group based in Inverness, said: This is the latest in a series of tightly targeted campaigns by HMRC to increase their tax take from specific sectors and, in line with previous campaigns, there are concessions for those who come forward and declare that they have unpaid or underpaid tax rather than wait to be found out.

Concessions include being able to advise HMRC how much tax you think you should pay, being able to agree to spread payments rather than paying in one lump sum, and also being able to make a disclosure at that time about any other unpaid tax, for example on untaxed earned income (profits), untaxed investment income (interest), and any capital gains.

Conversely, those with undisclosed tax liabilities who do not come forward and are investigated can expect HMRC to use the full weight of the penalty regime which is a penalty of up to 100 per cent of unpaid liabilities, or in the case of offshore income, 200 per cent. For those hoping their activities will pass unnoticed, HMRC is now much better resourced at identifying properties for rent and holiday properties by using the internet and other media, and particularly for special campaigns such as this.

In certain instances a review of undisclosed income may determine that a rental loss has been made, in which case this can be used to reduce future rental profits, but not to reduce the taxpayer’s tax liability on other income.

Once a Disclosure Reference Number (DRN) is issued by HMRC then a period of three months is allowed to calculate and pay what is owed.

The new campaign affects all let property including rented housing, certain rooms for rent, and holiday property at home and abroad from which rental income is derived. It does not cover undisclosed rental profits on non-residential property such as shops, offices and garages.