Please Help - What can he do?

JanetRutherford

Hello

I have a problem that has just come to light, that has sent me to the doctors for depression. Basically, I am married with one child and have lived in my house for 8 years.

10 Years ago we were forced to buy the house we were renting because the owner was selling up, so we were either homeless with child or had to buy the house (which we did). Soon after getting the mortgage we decided to split the house into 3 flats. The ground floor flat for us and the two upper floor flats to rent out. We have been renting the two flats out ever since. 2 Years ago we sold the ground floor flat because of money troubles and bought a smaller flat elsewhere.

Last week I learnt that my husband, who is still with me, has been renting out the flats illegally; for the last 9 years, unbeknown to me. Ithought he was doing everything above board and never thought to doubt him. Now though I am at the doctors on anti-depressants through worry of the taxman ever finding out.

My question is: What should I, and more importantly my husband, do? Should we go to the taxman and come clean about the 9 years of rent income even though we did not make any real money from the rent; it mostly went towards feeding us etc. I am worried they might send him to prison or give him a really big fine or something. We are both coming to pension age now.

Is there a form I can download or something that can deal with our situation? Please help because I do not know how much more stress I can take. I'm really worried.

Yours Sincerely

Janet Rutherford

Emmzi

Janet if that is your real name I suggest you delete your post and register with a pseudonym as a starter.

Do not panic! This is not as bad as you think it is. But, please post back again :-)

Emmzi

PS click the edit button on your post and delete your content. Then, register a new name. Like "anyone7" or similar, and repost.

anselld

Firstly don't panic or stress, easy to say I guess.
Need to understand the figures ...
How much rental income?
How much other income?
How much allowable expense for the lettings? ( maintenance, mortgage int, etc)

Don't forget you have £6,475 each of personal allowance each before any tax is payable.

So provided that ...
rental income - rental expense + other income .less than. 2x£6,475
... then you are probably OK.

Do the sums, then come clean by submitting self assessment tax return to declare the income. Get a tax accountant to do it if you are not sure how.

RacyRed

Janet, it is very important that you delete your post as quickly as you can, then re-register with MSE under a made up name.

If you then ask your question again we may be able to help you.

JanetRutherford

This is a bogus surname i am using.

Getting back the point, what are the tax implications for back dated rent that has not been declared.

Sincerely Yours

Janet Rutherford

G_M

HMRC are far more likely to look sympathetically at someone who comes clean than someone who gets caught out.
Don't want to further alarm you but they look at where people have multiple Title ownerships at the Land Registry, rental advertising, council tax returns, etc to find landlords who hide their income.

Their website tells you what expenses are tax deductable here eg mortgage interest, estate agent fees etc etc

You also need to consider whether your mortgage provider knows and has given permission to rent (though this is perhaps less serious than the tax) and whether your building insurers know (if they don't and the building burns down, they won't pay out when they find out!)

Emmzi

give us an idea of how much profit you think has been made after repairs, insurance etc.

If he makes arrangements to repay it's highly unlikely he'll go to the jail!

Can you sell the properties to pay the tax bill and keep your feet clear? You'll need to evict the tennants first, but you don't also want the bank coming after you for the increased interest you should have been paying. I'd get s.21s served and get the flats on the market asap.

Accountant_Kerry

Ok Janet, absolute worst case is a prison sentence, however this is highly unlikely if you are willing to pay. you need to basically do your accounts. if you used the money to feed yourselves etc this is still earnings. the tax man will be interested in rental income less allowable expenses, (mortgage interest, maintenence costs etc) you need to work this out for each tax year.

then take into account your personal tax allowance etc and this will give you a rough figure that you owe, you might need an accountant to do it for you properly if you aren't familiar with this stuff although that will cost you.

i would suspect your incoem from that 2 flats to be less than £600pcm for each flat, so less than £15,000 pa, with expenses and your tax allowance if you didn;t have other money coming in your bill is unlikely to be massive. at £1200 per month income and say £700 a month mortgage payments, thats only £500 a month income, so I maximum of approx £100 a month tax liability, * 9 years is £10,800. this is just an example using these very rough figures. and doesn't take into account maintenence etc.

When you converted the house did you do this properly at the land registry or is the building still registered as one?

although this isn't my area of accountancy you can pm if you need some help with working this stuff out, although not in a professional capacity etc etc.

GavB79

I'm sorry but whether you spent the money on food essentials or foreign holidays and fast cars is irrelevant! It is still taxable income.
I agree with the others, hold your hands up and I'm sure it won't be nearly as bad as you are imagining.

poppysarah

If your husband has done this without your knowledge then it's mostly his problem.

I'd get an accountant to go through all the figures and do the leg work with HMRC. Ring a few to see what they say.