undeclared rent

mrelephant_2

Up to 2yrs ago i let a house i owned for about 8yrs but never declared the income i was getting (which was only enough to cover the mortgage and bills which were still in my name) to the inland revenue.

However, my wife and i have now seperated and she is threatening to tell the tax office about it.

The house was in my name, i rented it to a friend who's name was never on the council tax, it was only my name on that.

What i want to know is, can the tax office come after me for none declared earnings after this period of time?

And

The fact the house, council tax, bills where in my name only, could i deny i rented the house out and say that it is my wifes word against mine that this actually occurred?, as there are no written records of this taking place

Innys

You could, in the immortal words of Blackadder, "Deny everything".

The risk you run with that approach is the HMRC may want to know why you were on the Council tax records for both the rented address and the one at which you lived. I'm sure they'll do other digging too and it may be difficult to ensure the stories you tell them are consistent.

Another approach would be to call her bluff. However, given what you've said, that may be a dangerous approach!

As the rent was only just enough to cover the mortgage, this may not be necessary. Get together your income and expense records and check that, for each year your expenses (including mortgage interest only, not capital) was at least as mich as your rent. Don't forget that you can inclue 10% of your rental income annually as a wear and tear allowance in your expenses.

If you do the maths it is likely you will have made a smallish loss every year. If so, confess all to the HMRC. They won't get upset about it and will allow you to carry the loss forward agaisnt future profits.

Even if you end up making a smallish profit, they aren't likely to crucify you.

Remember though, it's much better to admit it to them than have someone "grass" you.

Ian_W

I think the "deny everything" routine is more likely to end in tears and slapped legs than declaring it - particularly if you can show you made no profit when letting. As Innys says, get the figures together for outgoings and rent. You can only claim "wear & tear" if it's a furnished let though, but you can claim all the other running expenses.

Question is, if you sold the house did you declare any gain for CGT purposes? If not that would be a another very good reason why, say nowt might not be the best option. If you sold after 6/4/06 you can still declare it up until Jan 07 [I think] using your SA tax return. If you sold prior to that date then that might be an even bigger concern if she dobs you in!! :eek:

'Heaven has no rage like love to hatred turned, Nor hell a fury like a woman scorned.'
William Congreve - 1670-1729. [Now who said things have changed!!:rotfl: ]

PoorDave

The thing to remember is HMRC do "digging into people's affairs" every day, so they're quite good at asking tricky questions, whereas this would (presumably) be the first time you'd been faced with such a situation, and would therefore have to hope you were born to it!

As above, i'd confess right now, as it sounds like the tax to be paid would be minimal.

Unless you have better dirt on your wife/ex-wife than she has on you, in which case it's time for some fun!

mrelephant_2

Thanks for the responses so far.

I think i need to clear a couple of things up.

I sold the house back in May 2004.

The latter 8yrs of renting it out i lived with my wife in her own house but was not on the council tax records as doing so as i was on the records of the house i owned, as during that 8yr period she was claiming single person reduction against her coucil tax, which i'm sure the local council would be very interested in, (would i be correct in thinking this?, could they make a claim against her?) so i suppose i could use that as a little bluff calling against her.

The rent paid to me was cash in hand, so there are no bank records of it being paid.

Also the person i rented it to was not declared on the council tax, just myself. So as far as i can see it there is no records anywhere at all that the house was rented out, only records that i was the house owner, the coucil tax payer, and household bill payer, so how could it be possible for the tax office/inland revenue find out the house was rented other than word of mouth from my ex wife?

Finally, i did not make a claim for CGT.

and finally, i no longer have any records of the mortgage or the repayments, would i be able to get these from the lender should i need them?