If I start declaring now do I need to postdate rental income

laurapinky

Thanks in advance.

nomunnofun

laurapinky wrote: »

Good evening all-this is my first post so I hope I am in the correct place. I have a rental property that I have been letting out for the past six years or so. I am employed and do not complete a tax return. I have never declared the loss/or revenue from my rental property. I am now thinking I must start to declare it, in a effort to be honest. I have never received anything from HMRC. So question is if I was to do a return now, would I be able to start it from now or do I have to back date it to when I first started letting out and pay the fines.......whats to stop me just starting from now? And just declaring it from now onward? If not I am thinking or transferring the property into my young childs name-as the property will be his when he reaches 18.

Thanks in advance.

I can only assume that the highlighted part was in jest - you do not have a choice and are legally obliged to file returns each year. The idea that you can 'start it from now' is fanciful and incorrect.

You are now in the position where interest (on any tax that may be due) and penalties will be imposed. Your choice is:

a) complete the returns yourself, hope that they are correct (HMRC will inspect these returns as they are late and to determine penalties) and take the liability on the chin.

b) Seek advice from a tax expert. You will pay for the service but, provided that they are proficient, may well save you a considerable amount of money in the long run.

This is a very brief synopsis of the position that you are now in. I had an identical case last year - six years returns on an inherited property The clients were extremely fortunate in that they paid interest only - no penalties. A lot has to do with presentation of mitigating facts - you pays your money .....

Do not delay - you will feel much better having taken the appropriate steps.

Finally - HMRC will definitely look more favourably on your case when you make the initial dislcosure. They will not be so accommodating where they make the initial approach to you.

There are some ex HMRC staff on here other than myself, some of whom were inspectors who, no doubt, will point you further in the right direction.

Whoops - just noticed the last paragraph - children under eighteen cannot own property in their own name. There is the possibility of trusts but this is an area that I am not even going to pretend to know much about.

System

You need to contact HMRC and declare the loss or profit for each year since you started renting out the property and be prepared to pay any fines due to failing to notify them of the income.
Although HMRC may not have approached you yet about this they have been conducting a campaign of targeting landlords who have not previously declared this source of income.
They can find out about these through various methods including estate agency records, landlord insurance providers, tenants having to provide proof of rental contracts to Benefits agencies. These are just some of the ways they can trace non compliant landlords. They can also demand your bank statements to check for rental income coming in.

You should also be aware that in those years you made a profit you should have declared that income to the Tax Credit Office if you were in receipt of that at that time

nomunnofun

laurapinky - this may all sound quite scary. However, when the return are completed accurately with ability to prove the income and expenditure you will be expected to pay an amount as determined by HMRC. This will include any interest and penalties. That will be the end of it. You need to ask yourself if you can prepare the returns (and they will be paper as it is too late to file online) or seek professional help. A few months down the line and it will all be behind you.

agrinnall

It's not clear from your mixed use of the terms loss and revenue whether you have ever made a profit from renting. If you have made a loss in every year (remembering of course that if there's a mortgage on the property it's only the interest that can be offset against the income) then you may not have had to declare anything, but your best bet is to gather all the figures together and either call HMRC or go to see an accountant.

Whoops, just read your last post properly, so yes, it's only the interest that is deductible, but there are other allowances that can be taken into account to reduce your profit.

Skint_yet_Again

You are correct only the interest portion of your mortgage can be claimed. Do you have any other expenses ?

You need to declare this income from the date it started to HMRC but you may not necessarily need to complete a self assessment tax return. See here http://www.hmrc.gov.uk/sa/need-tax-return.htm
Only if property income is £10000 or more before expenses, or £2500 or more after expenses

If it is below these limits a letter containing your figures can be sent.

System

Remember too that losses can be carried forward and set against any profit in a later year. So it is worth declaring those years where losses arose.

xylophone

And with regard to the proposed transfer to your minor child, this could only be done through a trust and as the parent settlor, the income would be taxable on you.
http://www.hmrc.gov.uk/trusts/types/minors.htm