How do I declare unpaid rental taxes when years have passed already without payment?

WilliamO

Hi all,

I have a friend with tax problems and need your advise for him - Here is his story:

Regards

WilliamO

　

　

In 1995 I was made redundant on the grounds of ill health dur directly to an industrial accident at work, which I was compensated for. This compensation did not cover me sufficiently and has since burdened me with 17 years of early retirement. At the time and until this very day I have never seeked job seekers allowances or any other form of income support benefits. Although I was awarded Incapacity benefit and industrial benefit at a lower rate me and my wife were forced to live off her income and my benefits alone.

This could only be substained until about 2004. In 2002 we were forced to convert our house into three separate flats whereby by 2004 we were then living in one of the flats whilst renting out the other two. Due to the conversation costs incurred (i.e. repayments) we were then forced to sell our own flat around 2005/2006 in order to pay off debts occured.

Given my situation I did not particularly feel concerned to pay any rental tax, as I felt my circumstances were sufficient reason for not paying the tax in the first place. I have subsequently found out from speaking to someone who is more versed in the tax matters that I should have communicated with the tax office when I was first medically retired on the grounds of ill health in 1995 and given them information about my rental property in 2004 and they would have made the required adjustments to the amount of tax I should have to pay. With hindsight that would have been the best approach for me to take.

However, because I felt at that time I was entitled to an income that represented the standard yearly personal income/allowance and that I was not making any real money from the rents (i.e. not making the standard personal allowance/income) I therefore felt I owed the tax man nothing. Hence why I did not declare anything. Today of course I am a little wiser, hence why I am posting on this forum for advice.

I have the following questions, if anyone would care to help me with them it would be appreciated:

1) How can I start paying rental tax now for the years between 2004 and the present day (2012)? Would I be taxed a standard tax for each of those years or would it be based on some other calculations? (i.e. What would the percentages be).

2) What are the circumstances that the tax man considers when he is making an assessment such as mine?

3) What is the worst case scenario and what is the best? Can I argue the above in my favour or at the end of the day have I done wrong by not declaring these unpaid taxes?

agrinnall

If your earnings from all taxable sources, including rental income after offsetting allowable expenses, is less than your personal allowance then there is no tax to pay. If that is really the case for you then there shouldn't really be much to worry about. The important thing at this stage is to gather together all the paperwork to be able to make your case. Others should be able to advise whether your best option is to go direct to HMRC and ask for assistance or to see an accountant first.