Property Developers, Property Investors

HMRCs Let Property Campaign

simon

Simon Misiewicz

8th September 2021

Let Property Campaign

HMRC’s Let Property Campaign was introduced in Autumn 2013. It is a method for UK landlords and property investors to declare undisclosed income to HMRC and to pay any tax on their investments.

Launched in September of that year, the nationwide campaign was targeted at residential property landlords who were not declaring their rental income.

At the time, the Let Property Campaign represented the most prominent and longest campaign HMRC had ever launched in the UK and was expected to affect thousands of landlords and property investors.

HMRC estimated in 2013 that there were as many as 1.5 million landlords in the UK, but they had less than 500,000 on their books.

There were significant property tax revenues to pursue from these one million ‘missing’ landlords.

The Let Property Campaign was introduced to run for an initial 18 months. It is still in effect in 2021.

It’s advisable for any UK landlords or property investors who are behind in their tax affairs to read the HMRC Let Property Campaign guide in full to see how they can make a disclosure and reduce penalities.

Frequently asked questions about the Let Property Campaign

As property accountants, we are regularly asked about the Let Property Campaign from HMRC, allowing UK landlords to disclose their income. We will look to answer the below questions in this Article.

“Are you paying too much property tax?”

“Why should I use the Let Property Campaign?”

“What are the basics of HMRC’s Let Property Campaign?”

“How does HMRC property let scheme work?”

“What are the penalties for tax return late submission?”

“Will I pay less tax by using HMRC property let?”

“Does HMRC contact landlords about the Let Property Campaign?”

“Where does HMRC get information from about let property?”

Are you paying too much property tax?

Our property tax specialists help over 1,000 monthly retained UK landlords and property investors to minimise tax whilst building their wealth.

There are many reasons why landlords pay far more property tax than they need to.  This is because:

-They do not know what they do not know.

-They have not spoken to a tax specialist to go through their situation to see what tax reliefs are available to them.

-Their accountants or solicitor are not aware of the many reliefs available to their clients and are not taken advantage of.

-Tax legislation changes but either the person or their accountant/tax specialist have not been made aware.

Why should I use the Let Property Campaign?

The Let Property Campaign presents an opportunity for residential property landlords in the UK to get up-to-date with their tax affairs, taking advantage of the best possible terms from HMRC.

HMRC allows for full disclosure from landlords and property investors, with 90 days to work out and pay any tax owed.

HMRC often examines property transactions to check that taxpayers are declaring the correct amount of income and gains.

Whilst the campaign focuses on undisclosed rental income, HMRC issued nudge letters in late 2020 to indicate that some people could need to tell HMRC about gains from property sales.

Since being launched in 2013, property industry sources claim that the Let Property Campaign has clawed back more than a quarter of a billion pounds in taxes from UK landlords and property investors for HMRC.

Whether the current voluntary system will be replaced by a more direct approach by HMRC to tracking down private residential landlords who fail to declare rental income has also been questioned.

Read this guide from HMRC to find out how to use the Let Property Campaign.

If you’re unsure about how to get your property taxes in order, speak to one of our property tax accountants today.

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What are the basics of HMRC's Let Property Campaign?

As property accountants serving thousands of UK landlords who purchase buy to let properties, we know that tax-efficient is of prime concern to our property investor clients.

For those landlords who are not up-to-date with their property tax affairs, the Let Property Campaign is a long-running disclosure opportunity from HMRC that allows individuals to disclose undeclared income from previous tax years in a straightforward way.

HMRC receives data from various sources about rental properties, including letting agents, land Registry, Council records, mortgage applications and tip-offs from members of the public.

HMRC can analyse data from different sources and flag up taxpayers who do not appear to be paying the correct amount of tax.

This can lead to a nudge letter from HMRC to landlords and property investors, inviting them to use the Let Property Campaign to get their tax matters in order.

HMRC property let scheme is open to a range of residential property landlords, including

* landlords with one or more UK or overseas residential rental properties

* landlords renting rooms in their primary home using the Rent A Room Scheme

* landlords who specialise in property lets for students and workforces

* landlords with holiday lettings

Landlords who think they have underpaid tax should contact HMRC through the Let Property Campaign as soon as possible.

Once HMRC has been notified by a landlord that they wish to be involved in the scheme, they are required to disclose to HMRC any income, tax, gains and duties they’ve not previously disclosed.

Landlords are then required to make HMRC a formal offer and pay what they owe.

HMRC give landlords the best possible terms under the Let Property Campaign, with lower penalties available to those who provide the most accurate and prompt information.

Have a question about property investments, tax or being an expat?

There are a number of free events that will help you build investments/businesses with more comfort and move forwards with confidence.

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How does the HMRC property let scheme work? 

HMRC property let scheme is relatively straightforward for landlords and property investors to use.

The following steps need to be taken:

– HMRC will issue a Payment Reference Number once you have advised them you wish to use the Let Property Campaign.
– All previously undeclared income and gains must be included in your disclosure, such as business profits and investment income as well as rental income and gains.
– Calculation of the additional tax, interest and penalty due for each tax year covered by the disclosure
– You must pay HMRC the amount offered using your Payment Reference Number
– Once your disclosure has been submitted, the HMRC will issue an acknowledgement letter within a fortnight. They will carry out further internal checks and issue a formal acceptance letter if satisfied that full disclosure has been made
– You must ensure moving forward that you are compliant with current and future tax affairs by registering for Self-Assessment and declaring all income and gains via your annual tax return

There are technical rules to be aware of and potential arguments to try and utilise to restrict the number of years to include and minimalise penalties from HMRC.

We recommend that you speak to an experienced property tax accountant before disclosure.

What are the penalties for tax return late submission? 

The rate of penalties for tax return late submission varies depending on your circumstances.

Penalties will be lower if your disclosure is voluntary and of good quality with thorough information.

Penalty levels will differ depending on if you submitted inaccurate returns to HMRC or if you have never previously submitted any returns.

HMRC allows reductions to the maximum penalty in a range for the quality of the disclosure.

Penalties are often calculated as a percentage of the tax underpaid.

HMRC says that if a taxpayer has underpaid tax despite taking ‘reasonable care’ with their tax affairs, there will be no penalty.

The term ‘reasonable care’ is a reference to each particular taxpayer’s abilities and circumstances.

To contact HMRC about the Let Property Campaign, click here.

If you’re looking for property tax advice, contact one of our team today.

Will I pay less tax by using HMRC property let?

It is unlikely that less tax will be paid by using the Let Property Campaign.

There is still a significant benefit in using the scheme rather than going through an HMRC tax investigation.

It is unusual for the scheme office to request invoices and receipts for expenses. They do allow a degree of estimation where information cannot be obtained.

Under an investigation, the requests for information and paperwork are far more stringent and take longer to complete. This means that it is likely you would pay far more in professional tax advisor fees.

It is also possible to reduce potential penalties by approaching HMRC before they contact you.

Good property tax advisors will help landlords and property investors to gain the minimum penalty rate possible, as well as helping landlords to navigate through any tax issues that arise.

Does HMRC contact landlords about the Let Property Campaign?

HMRC targets tax compliance activity across all UK landlord types.

They will identify and write to landlords and property investors who they consider not declared all their rental income.

If HMRC then has to carry out compliance checks or enquiries to resolve matters, you will not then be able to use the Let Property Campaign.

Voluntary disclosure is recommended to resolve penalties and resolve matters. This can also help convince HMRC that simple mistakes or errors have been made rather than more severe issues.

During a single Summer, HMRC sent tens of thousands of letters to landlords suspected of avoiding or underpaying tax under the banner of the Let Property Campaign.

The majority of those targeted were landlords with one or two properties to let.

These letters gave the landlords a 30-day period to contact HMRC and then 90 days to repay the outstanding tax.

By utilising the Let Property Campaign, these landlords were informed they could gain favourable terms, while those who didn’t would face investigation, higher penalties and the prospect of a criminal conviction.

Where does HMRC get information from about let property? 

HMRC has broad information powers to obtain details about let property in the UK, including:

* Council, for landlords providing accommodation to housing benefit claimants

* the land Registry for details of who holds the legal ownership of a property

* HMRC also has powers to gain information from third parties such as letting agents, anyone who searches for tenants, and internet-based letting services

HMRC has also developed in recent years systems to manage and analyse data, ensuring they have access to large lists of persons in receipt of rental income.

Income tax: You may be interested in our main Article on Self-assessment tax returns or our other Article where we focus on how much income tax you need to pay to HMRC.

You may also be interested to know more about our tax saving services for UK landlords and property developers.

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