Advice on HMRC asking for taxable income on rental

muhandis

As others have said, in your place I would pay for an accountant to craft an appropriate response and calculate the returns for the past years.

You will have to pay back taxes (if any are due). Any penalty will likely be minimised by letting a professional handle it.

Going forward just do a self assessment tax return online to capture the property income, it's very straightforward.

lachesis wrote: »

am I going to get a demand for huge cash settlement basically.

xylophone

(nit just the interest but expenses and you can also claim for a maintenance allowance.

Scratching his head over the calculations?:)

As others have said, a tax accountant should be able to help and ease the worry.

theartfullodger

Very pleased to hear HMRC are chasing up people who've "forgotten" to declare their various incomes.



Well done HMRC.

babyblade41

You need to act swiftly as HMRC hate thinking they are having the wool pulled over their eyes.

I opened up an account a few years ago.. I just forgot to send the yearly interest report over to my accountant ..
The fall out was monumental , firstly from my accountant !!! and she had to beg on my behalf that it was an honest mistake , which it was.

Thankfully they accepted my plea and I paid my fine :-( hardly any difference to my tax bill but a lesson learned .

It amazes me that just because you say you didn't make a profit , you still have to inform HMRC with a self assessment .

Think yourself lucky with a fine

MEM62

babyblade41 wrote: »

It amazes me that just because you say you didn't make a profit , you still have to inform HMRC with a self assessment .

That will be because HMRC's definition of 'profit' and the OP's are different.

00ec25

ACG wrote: »

There will probably be a tax demand as the last couple of years you have been unable to declare the interest element of your mortgage (either in full or part) as an expense..

no, that is wrong, a perfect example of why if you want tax advice you ask an accountant, and if you want to buy a mortgage you ask a mortgage salesman

we are in a transitional period until April 2020. So yes you can claim some of the interest in full as a deduction, but some will be given as a credit
you can google the rules

ACG wrote: »

There could also be fines and interest added to it for not paying your tax and not declaring it.

"Declaring unpaid tax
You can declare unpaid tax by telling HMRC about rental income from previous years. If you have to pay a penalty it’ll be lower than if HMRC find out about the income themselves.
You’ll be given a disclosure reference number. You then have 3 months to work out what you owe and pay it.
Do not include the £1,000 tax-free property allowance for any tax years before 2017 to 2018."

https://www.gov.uk/renting-out-a-property/paying-tax

by the sounds of it, you are too late to "make a disclosure" as HMRC are now chasing you … so:

HMRC will look at the reasons why tax has been underpaid and how much is due. This determines your penalty liability.
This will fall into one of four categories:

• Mistake or Misinterpretation
• Failure to take reasonable care
• Deliberate Understatement
• Punishment For Not Declaring Income

muhandis

If you don't mind me asking, how much interest are we talking about here?

babyblade41 wrote: »

I just forgot to send the yearly interest report over to my accountant ..

gingercordial

Please consult a professional on this. They are more likely to find a way to reduce any penalties, and more likely to obtain an agreement to pay anything you owe in instalments.

lachesis

Just an update for anyone wondering and who got into this sort of trouble as well. I spoke briefly to an accountant but they said it was straightforward. I had to provide a lot of information which was:

1. Rental statements for the years covered (estate agent was able to provide these for 8 years)
2. Mortgage statements for the years covered (lender provided these at a cost of £5 per year requested)
3. Bank statements showing relevant data pertaining to the accounts for the years the rental was in place. I got these from my acount online. Took ages going through and redacting all the non related items lol

I won't be getting fined as it was non-deliberate and the threshold of penalty was too low. I complied in a timely and responsible manner with HMRC during the investigation as well.

So ultimately for the 8 or so years, I actually owe just over 100 english notes :T:T:T

Some important factors (my mortgage was interest only), which I believe is the largest determining factor here. If there were 'capital gains' then the amount owing would be more obviously. I still have to do a self assessment for this year as well even though the property will be sold by then Thanks to those that gave the good advice.

Vestra wrote: »

Glad to see HMRC cracking down on tax evasion.

theartfullodger wrote: »

Very pleased to hear HMRC are chasing up people who've "forgotten" to declare their various incomes.

Well done HMRC.

Sorry folks, look like you embarassed yourselves for nothing /chuckle Stay salty. Good to see the system supports honest folk who just make honest mistakes right? Exactly how it should be.

AdrianC

lachesis wrote: »

Vestra wrote:

Glad to see HMRC cracking down on tax evasion.

theartfullodger wrote:

Very pleased to hear HMRC are chasing up people who've "forgotten" to declare their various incomes.

Well done HMRC.

Sorry folks, look like you embarassed yourselves for nothing /chuckle Stay salty. Good to see the system supports honest folk who just make honest mistakes right? Exactly how it should be.

Woah, hold on... They DID crack down and chase you up, remember? And why? That's how you had to spend a lot of time and effort on producing the information you should have been providing annually via the self-assessment tax returns you had a legal obligation to complete... Or, to put it another way, tax evasion. I'm not sure HMRC should be routinely separating incompetence and ignorance from deliberate malicious intent, simply because it's so straightforward to spin one as the other.

Yes, they were lenient and didn't penalise you for your failure to meet your legal requirement. But that, and the fact that your ultimate bill is so small, are more down to you being able to demonstrate that your business had been spectacularly unprofitable over the years than through anything else. If you'd been running any kind of viable business, your bill would have been much larger, and you may very well have had a penalty. Remember, tax on profits are a tax on PROFITS. You may celebrate the fact that you've had to pay very little tax, but that's only because you've not made any of it in the first place, so haven't even seen the ~80% you'd have kept after tax...