Does my friend need to be doing a tax retun?

kinger101

mrginge wrote: »

Can you provide evidence from hmrc that you do not need to declare rental income if you have calculated zero tax liability?

Well, no. I can show you where on the HMRC site it says you should file a tax return if you have gross rental income of £10,000 or net rental income of £2,500. But I cannot show you within the legislation where you are required to do this, because as far as I am aware, it does not exist.

The actual requirements of the taxpayer are;

(a) to file a tax return if given notice to do so by HMRC;
(b) give notice to the HMRC where they have additional liability to tax.

This is set out in sections 7 and 8 of the Taxation Management Act

http://www.legislation.gov.uk/ukpga/1970/9/pdfs/ukpga_19700009_en.pdf

mrginge

kinger101 wrote: »

Well, no. I can show you where on the HMRC site it says you should file a tax return if you have gross rental income of £10,000 or net rental income of £2,500. But I cannot show you within the legislation where you are required to do this, because as far as I am aware, it does not exist.

The actual requirements of the taxpayer are;

(a) to file a tax return if given notice to do so by HMRC;
(b) give notice to the HMRC where they have additional liability to tax.

This is set out in sections 7 and 8 of the Taxation Management Act

http://www.legislation.gov.uk/ukpga/1970/9/pdfs/ukpga_19700009_en.pdf

Doesn't your assertion directly conflict with the advice provided by owitemisermusu?

Do you think it is appropriate to dismiss their comments as 'ignorant' when they base it on documented advice from hmrc?

Where specifically do you believe in sections 7 or 8 it states that this type of income (as opposed to profit or gain) is non-declarable?

kinger101

mrginge wrote: »

Doesn't your assertion directly conflict with the advice provided by owitemisermusu?

Do you think it is appropriate to dismiss their comments as 'ignorant' when they base it on documented advice from hmrc?

Where specifically do you believe in sections 7 or 8 it states that this type of income (as opposed to profit or gain) is non-declarable?

Let's be clear about this. HMRC do not write the tax legislation. They merely collect taxes and enforce it. They may produce guidelines, but sometimes, these contradict the legal position. As an analogy, the Police do not write criminal law.

The Taxation Management Act covers all income tax.

s7 mentions "every person who is chargeable to income tax". It doesn't need to specifically mention how the income tax liability arises. Likewise with s8.

Other than that, you asking me to describe something that doesn't exist. Which was my original point about the HMRC's requirements having no legal basis.

By ignorant, I meant unaware. It was not meant as a pejorative term. owit' implied they were not sure of the law, and then also posted something that was category incorrect about about (a) being duty bound to submit a tax return and (b) Schedule A losses being "adjustable" via PAYE. So I think it's entirely appropriate given it's based on their own admission.

Pricivius

If it helps at all, I rented out a second property for a few years. I called HMRC at the start and they told me to call back at the end of the first tax year with figures for rental income and then deductions. I called back and they took the figures over the phone, worked out a profit of a few hundred pounds and adjusted my PAYE tax code. Job done. I called back twice thereafter to give figures for the following years and my PAYE tax code was adjusted each time.

I do not recall the threshold, but they suggested that my small profit, which actually decreased in the following years, did not warrant a tax return.

I would give HMRC a call - I found them very helpful.

TheCyclingProgrammer

theartfullodger wrote: »

She really wants to do a return: for 2 reasons...
a) To avoid fines & penalties from Mssrs HMRC..
b) So she can carry losses forward & then pay less tax in future if & when she makes a profit..

Cheers!

If she has genuinely made a loss, there are no fines or penalties that HMRC can levy. Failure to notify penalties are based on a percentage of tax owed. Kinger101 got it right.

TheCyclingProgrammer

mrginge wrote: »

Can you provide evidence from hmrc that you do not need to declare rental income if you have calculated zero tax liability?

Taxes Management Act 1970 s7 and s8 outline the duties of a taxpayer with regards to notifying HMRC and submitting returns.

HMRCs have a different view but their word is not law. It's at best, guidance, at worst, wishful thinking. HMRC published guidance is for all landlords to register for self assessment with gross earnings over £10k even if there is no tax due.

Having said that, HMRC do back up what the law says in their self assessment manual, you have to dig deep to find it:

Exceptions to the requirement to notify chargeability
Section 7(3) to (7)

There are exceptions to this requirement. These are where the taxpayer has no chargeable gains (or such gains as there are do not exceed the annual exempt amount), and either:

has no net liability to income tax for the year, or
has had sufficient tax deducted at source to meet the net income tax liability for the year.

http://www.hmrc.gov.uk/manuals/salfmanual/SALF210.htm

Seems pretty clear to me. If you have no net liability to tax, aren't already registered for self assessment and HMRC don't write to you and ask for a return, then you have absolutely no obligation to notify them of anything. There is no penalty for failure to notify unless here has actually been a loss of tax.

That said, if HMRC ask for a self assessment, or you already do one, then you have to report all income regardless of profitability.

TheCyclingProgrammer

The most important thing for OPs friend is that they are absolutely sure that they have no net liability to tax. This means they need to have calculated their losses correctly.

If they have not done so and have to later disclose unpaid tax to HMRC, they will face a penalty (IIRC between 0-30% of owed tax for failure to disclose as a result of carelessness) plus the tax itself and interest.