Letter from H.m.r.c

paul2468

I bought a flat when i was in the army in Dec 1990...and apart from a couple of months when i came home on leave i never lived in it......i rented it out untill i sold it in march 2005, i made aprox £30k on it.....last week out of the blue i recived a letter out of the blue saying it has come to our attention that i had property that i never declared and they have sent 2 tax returns for 2003/2004 and 2004/2005....i have never filled a tax return in before as i have always been employed....can anyone tell me what tax thay would be looking at me re paying and should i get an accountant ?.....Can they go back to 1990 for back tax ?

fengirl_2

You need to see an accountant as soon as possible. Although they are unlikley to go back to 1990, HMRC can certainly go back 6 years and will be looking for the tax on the profit from the letting, plous interest, plous a penalty of up to 100% of the tax due. The penalty can be reduced - they would take into account your co-operation, the fact that you didnt own up to it, the fact that it covers a long period and the amount of tax lost will also be taken into account. An accountant will be able to negotiate with HMRC to bring this down as low as possible. Be prepared to make a payment on account in order to show good faith. I am assuming you are not liable to CGT as you have been living with the Army, but the accountant will advise.

paul2468

Yes i can see that getting an accountant would be the best thing...someone did tell me in 2004 when i sold the place...if you dont hear from the taxman within 12 months it means you dont owe any tax....how wrong can one be.

TM1976

I agree with Fengirl you need to see an accountant.

Just one point on the detail here. You say "and apart from a couple of months when i came home on leave i never lived in it".

Do you mean you had a room, a key and free run of the apartment even though it was let? If this is the case it may be possible that you actually had a lodger and can use your rent a room exemption.

Distiction here is - "you lived here but you were hardly ever there" vs "You let the property as a whole to someone else".

paul2468

No what i meanis that when i first bought the place i used to use it to crash out when i was home on leave, but after a few months it made better sense to rent the place out. I just wonder why it took them so long to get in touch with me.

cfnc

If this was your only owned property at that time, it is just the rental income that they are looking at.

But you can deduct Mortgage interest, Council tax and I also think 10% of income received as a standard calculation for general wear and tear.

It shouldnt be too difficult and you should be able to send the information in yourself.

Kirsty