HMRC Let Property Campaign

MizzMunnypenny

Hi

Not sure this is in the right category - I'm not after cutting tax (maybe HMRC tax penalties, but happy to pay the tax I owe!)

After applying for the working from home allowance last month, I had a letter through from HMRC asking about income from letting a property. I assume my request for the tax allowance prompted this.
 
I own a house that I have let out since 2002 - 'accidental landlord' as I used to live there before I met my husband.

I last did a tax return in 07-08. I had made a loss and was advised not to do another tax return unless there was a change in my circumstances. I then made further losses due to having to replace windows, kitchen, bathroom, carpets (like for like, not improvements!), dodgy tenants etc over the next 3 years.
 
By the time I started making profit again, I had over £7k of losses to offset. 

I had been on mat leave by then and was only working part time. My income had halved and I wasn't paying Tax through PAYE as i was under the limit. I really didn't think about the tax situation - if it did cross my mind I assumed the losses and balance in PAYE would cover it. 

However, on getting the letter from HMRC I have got my books up to date and from 2018/19 I had a small amount of tax to pay. I work it out as 18/19 - £168, 19/20 - £200 and £538 for 20/21 (due to an increase in contracted hours and a pay rise) I hadn't heard about the new rules that were brought in re offsetting finance against profit, so that hasn't helped!

Paying the tax is not a problem - it was a genuine mistake/oversight and I'm more than happy to pay what I owe - but when I put the figures in the penalty calculator it wants to charge a flat fee of £1600 for the earliest two years - plus interest and late payment fees, so the penalties total about £3600 for those two years  I rang HMRC today to check the situation, and they just said it was dealt with on a case by case basis.

Has anyone any experience of making a disclosure under the Let Property Campaign - are those penalties right? 

Thanks for your time!

Dazed_and_C0nfused

Is the £1600 relating to the let property campaign or penalties for filing a late return?

MizzMunnypenny

It's for filing a late return - there's a link that takes you from the LPC page to the penalty calculator. 

CKhalvashi

If I were in this position, I'd be looking to approach HMRC through an accountant with a full disclosure, as hopefully this should reduce any penalties if you own up and offer to pay. You're likely to pay less in penalties than you're paying for the accountant if they can negotiate a settlement.

No guarantee it will reduce the penalties, however if you're willing to cooperate, this should ensure a reduction in any further penalties.

I've never dealt with HMRC in these circumstances, however contrary to a lot of popular belief, I have always found them helpful and efficient to deal with once I've been able to contact the correct team, with accurate answers to any questions I may have.

Dazed_and_C0nfused

MizzMunnypenny said:

It's for filing a late return - there's a link that takes you from the LPC page to the penalty calculator. 

I'm confused, have you actually been sent notices to file a return?

If not then how can you be late filing one?

MizzMunnypenny

No - no notices to file received - but the onus was left on me by HMRC to report a change to my circumstances ie when I started making a profit and earning over my tax code - which I didn't do. So I think I am technically late in filing as I should have checked the financial situation and should have filed tax returns for the last 3 years. 

Dazed_and_C0nfused

I think you're mixing up your penalties.

You may have a penalty for late notification and late payment of the tax owed but a late filing penalty can only be charged if you have failed to file a return within 3 months of the notice to file it being issued (or normal 31 January date if that is later).

So until returns are actually issued a late filing penalty isn't relevent.

[Deleted User]

CKhalvashi said:

If I were in this position, I'd be looking to approach HMRC through an accountant with a full disclosure, as hopefully this should reduce any penalties if you own up and offer to pay. You're likely to pay less in penalties than you're paying for the accountant if they can negotiate a settlement.

No guarantee it will reduce the penalties, however if you're willing to cooperate, this should ensure a reduction in any further penalties.

I've never dealt with HMRC in these circumstances, however contrary to a lot of popular belief, I have always found them helpful and efficient to deal with once I've been able to contact the correct team, with accurate answers to any questions I may have.

I have extensive experience in this area and have to say that this is pretty sound advice. 

[Deleted User]

As an aside - who on earth advised that a return ‘was not required’ due to a loss incurring? Was it HMRC? How could losses be carried forward if not declared?

As returns have not been submitted there could well be little possibility of having the losses of £7k relieved. Does the estimated new liability include losses brought forward? I would strongly advise that professional advice is sought.

Thrugelmir

MizzMunnypenny said:

I work it out as 18/19 - £168, 19/20 - £200 and £538 for 20/21 

That's a very low level of profitability for a property first let in 2002. Is your mortgage on an interest only or repayment basis? 

[Deleted User]

Thrugelmir said:

MizzMunnypenny said:

I work it out as 18/19 - £168, 19/20 - £200 and £538 for 20/21 

That's a very low level of profitability for a property first let in 2002. Is your mortgage on an interest only or repayment basis? 

That prompted my concern that the op may be wishing to utilise losses from earlier years!