In 2013 HMRC launched the Let Property Campaign to make it easier and more efficient for landlords to bring their tax affairs up to date. As well as allowing taxpayers with undisclosed property income to come forward and declare all of their income, with beneficial terms and lower penalties, HMRC also made contact with a number of individuals where they held information which indicated that they may not have fulfilled their tax reporting obligations.
It was recently announced that Airbnb will now be sharing data with HMRC about the earnings of their hosts on its UK platform. We are therefore expecting another wave of letters to be received by individuals who may not have declared their income from letting a property in this way.
There are many genuine reasons why people may not have declared income from a let property. One of the most common reasons is believing that there is no ‘profit’ as the mortgage repayments and other expenses exceed the rents received. In fact, only the interest element of any mortgage payment is allowable for tax purposes and so you may have a taxable profit even if there is not a ‘cash’ profit.
We have dealt with a number of disclosures to HMRC surrounding undeclared rental income, both through the Let Property Campaign and also outside of this facility. HMRC will always look more favourably on those making ‘unprompted’ disclosures i.e. providing them with all the information before they make contact with you to say they believe you have undeclared rental income. It is therefore recommended to make contact with HMRC as soon as possible if you believe you have undeclared income as in some cases the penalty can be reduced to nil.
Please get in touch if you would like to discuss the disclosure process in more detail.