Hmrc letter about non declared rental income

sheramber

Ferro said:

Hoenir said:

Ferro said:

Hoenir said:

silvercar said:

Dazed_and_C0nfused said:

A more common scenario would be rental income from a separate property.

Is there no possibility that could be relevant 🤔.

If it is a private arrangement with your sister & brother in law it's hard to see how HMRC would be aware of that.

I would also suspect this. I would guess a neighbour has reported something fictitious, just to spook hmrc into sending you the letter you have received. 

HMRC have access to a variety of data sources that now enable them to open lines of enquiry. 

Hard to see how they would access the information provided by the op. 

I agree they don't.  Something else has triggered events. 

When I started with the Inland Revenue we were told that the most common source of information received was from the taxpayer themselves e.g. boasting of evasion, advertising, bad workmanship leading to informing etc etc 

Not suggesting that this has remotely been the case with the op, of course.

Very much so. Boasting how they don't pay tax not realising that others don't share their glee.

ha12roon

Bookworm105 said:

the blunt answer is the rent a room (RaR) allowance of £7,500 is the amount of money you can receive WITHOUT deducting any costs from it.

you admit that the monthly mortgage payment + their contribution to bills  = > £625 per month so yes, you have made a taxable profit from your rental income under the RaR scheme 

As part of the rent was payment of your own personal mortgage, then the alternative of claiming income - costs = taxable profit would not work anyway, as mortgage is not an allowable cost in such a calculation

Rent a room in your home: The Rent a Room Scheme - GOV.UK (www.gov.uk)

if you want to contest the above then you will need to convince HMRC that your sister and her partner formed part of your own household and therefore bills (incl mortgage) were split between you as part of a mutual payment exercise. For example, I pay the mortgage, you buy the food that we all eat. Not very credible given what you have said so far.

Thank you for your input. I have looked into the scheme via above link very helpful.

So assuming I go ahead under this to send them all the info required is this something straightforward or should I look for an accountant. 

Not sure if due to me inadvertently not declaring this income I should now look to use the hmrc  Lettings Campaign instead as a prompted disclosure to cover income above the 7.5k threshold which will have impacted 21/22 partially so under limit in this TX yr, and then above it In 22/23, and 23/24. Would backdated late  tax returns be required or can this just be done through above disclosure campaign instead backe?

TIA

ha12roon

Hoenir said:

Ferro said:

Hoenir said:

silvercar said:

Dazed_and_C0nfused said:

A more common scenario would be rental income from a separate property.

Is there no possibility that could be relevant 🤔.

If it is a private arrangement with your sister & brother in law it's hard to see how HMRC would be aware of that.

I would also suspect this. I would guess a neighbour has reported something fictitious, just to spook hmrc into sending you the letter you have received. 

HMRC have access to a variety of data sources that now enable them to open lines of enquiry. 

Hard to see how they would access the information provided by the op. 

I agree they don't.  Something else has triggered events. 

Not sure what but thankfully hasn't been going on for longer otherwise would be alot worse I fear in hmrcs eyes

ha12roon

Hoenir said:

ha12roon said:

I have recieved a letter from hmrc about suspected non declared rental income.

What did the letter actually say?

From what you've said in your OP. The HMRC would have no knowledge of this arrangement. What therefore has sparked their interest? 

Letter is what is known a nudge letter I belive after doing more research and states they believe I may have recieved rental income I have not declared and want a response.

ha12roon

sheramber said:

Ferro said:

Hoenir said:

Ferro said:

Hoenir said:

silvercar said:

Dazed_and_C0nfused said:

A more common scenario would be rental income from a separate property.

Is there no possibility that could be relevant 🤔.

If it is a private arrangement with your sister & brother in law it's hard to see how HMRC would be aware of that.

I would also suspect this. I would guess a neighbour has reported something fictitious, just to spook hmrc into sending you the letter you have received. 

HMRC have access to a variety of data sources that now enable them to open lines of enquiry. 

Hard to see how they would access the information provided by the op. 

I agree they don't.  Something else has triggered events. 

When I started with the Inland Revenue we were told that the most common source of information received was from the taxpayer themselves e.g. boasting of evasion, advertising, bad workmanship leading to informing etc etc 

Not suggesting that this has remotely been the case with the op, of course.

Very much so. Boasting how they don't pay tax not realising that others don't share their glee.

Nothing here r.e. Boasting I lived a pretty miserly decade to save up large amount for house purchase still drive my 20yr old dependeble toyota. why mortgage is so affordable now but I earn less than average uk wage and would just do without luxuries when was single, unfortunately things are harder now across the board with me being sole breadwinner and looking after  wife and baby so can't live without alot of basics but still gratefully not much worse like others atm tbh.

This is where living as a larger extended family unit helps but never thought would cause these issues down the road.

saajan_12

The rationale behind taxing this is that you do get some monetary profit, in that your mortgage and your bills (standing costs and your usage) are paid. Even if it doesn't go into your bank account, it's not all costs attributable to them.I know this would be offset by some inconvenience, but so is any rental. 

One way of calculating would be total rent income (including bills they paid for you) less expenses that are attributable to them, ie their fair share of bills. The other way is the Rent A Room scheme, whereby you instead deduct £7500 for the year. The idea behind this was to make it easier rather than making small time LLs calculate exact expenses and also to give a generous allowance to encourage people to use extra space in their homes. So the expenses would never be deducted on top of the tax free 7.5k.

ha12roon said:

....

Then from late 2021 when they both got back on their feet they started as way of paying us back for looking after them during a very tough time. they started covering my monthly mortgage payment (I have very low loan to value and monthly mortgage is circa £450per month but market rents in similar houseshare situation would be double this with bills on top for houseshares  here locally). Also later on my sister started covering gas and electric bills and c.tax.

... 

I have done some research and there is the rent a room scheme I believe if this is classed as renting that I would qualify under in our case and the mortgage payments would equate to less than the 7.5k tax threshold but not sure if when they started also paying bills if that would also be included which would take it over and I'm assuming I owe tax on this portion. I make all the payments and they reimburse me so is no profit. 

Ferro

ha12roon said:

sheramber said:

Ferro said:

Hoenir said:

Ferro said:

Hoenir said:

silvercar said:

Dazed_and_C0nfused said:

A more common scenario would be rental income from a separate property.

Is there no possibility that could be relevant 🤔.

If it is a private arrangement with your sister & brother in law it's hard to see how HMRC would be aware of that.

I would also suspect this. I would guess a neighbour has reported something fictitious, just to spook hmrc into sending you the letter you have received. 

HMRC have access to a variety of data sources that now enable them to open lines of enquiry. 

Hard to see how they would access the information provided by the op. 

I agree they don't.  Something else has triggered events. 

When I started with the Inland Revenue we were told that the most common source of information received was from the taxpayer themselves e.g. boasting of evasion, advertising, bad workmanship leading to informing etc etc 

Not suggesting that this has remotely been the case with the op, of course.

Very much so. Boasting how they don't pay tax not realising that others don't share their glee.

Nothing here r.e. Boasting I lived a pretty miserly decade to save up large amount for house purchase still drive my 20yr old dependeble toyota. why mortgage is so affordable now but I earn less than average uk wage and would just do without luxuries when was single, unfortunately things are harder now across the board with me being sole breadwinner and looking after  wife and baby so can't live without alot of basics but still gratefully not much worse like others atm tbh.

This is where living as a larger extended family unit helps but never thought would cause these issues down the road.

I think sheramber was replying to my post - there is no suggestion that you were boasting about anything.

If I were you I would strongly suggest that you engage a professional who will be better placed to establish what information HMRC has. 

From the information that you have provided I would be seeking to shutting the enquiry down at the earliest opportunity. There really seems to be little value in their enquiry. You may well need the co-operation of your house guests to confirm that all monies were simply a reimbursement of household expenses. Again - I wouldn’t recommend dealing with an experienced HMRC compliance officer on your own. 

Grumpy_chap

Dazed_and_C0nfused said:

A more common scenario would be rental income from a separate property.

Is there no possibility that could be relevant 🤔.

If it is a private arrangement with your sister & brother in law it's hard to see how HMRC would be aware of that.

Is it possible that the lodgers (Sister and BiL) have claimed any benefits and declared rent paid in that process, and then the DWP shared information with HMRC about Sister plus BiL that got linked back to the OP?
Quite a lot of assumptions would have to be in place for that in any case, not least that the various Departments of the Civil Service were operating in such a joined up way.

ha12roon

Grumpy_chap said:

Dazed_and_C0nfused said:

A more common scenario would be rental income from a separate property.

Is there no possibility that could be relevant 🤔.

If it is a private arrangement with your sister & brother in law it's hard to see how HMRC would be aware of that.

Is it possible that the lodgers (Sister and BiL) have claimed any benefits and declared rent paid in that process, and then the DWP shared information with HMRC about Sister plus BiL that got linked back to the OP?
Quite a lot of assumptions would have to be in place for that in any case, not least that the various Departments of the Civil Service were operating in such a joined up way.

No benefits involved I don't qualify anyway and sister and BiL were living off savings at the time and were not entitled to anything either.

Hoenir

Grumpy_chap said:

Dazed_and_C0nfused said:

A more common scenario would be rental income from a separate property.

Is there no possibility that could be relevant 🤔.

If it is a private arrangement with your sister & brother in law it's hard to see how HMRC would be aware of that.

Quite a lot of assumptions would have to be in place for that in any case, not least that the various Departments of the Civil Service were operating in such a joined up way.

HMRC uses sophisticated computer software called Connect as a key data analysing tool. 

The databases includes the following.

• Tax returns (including VAT, PAYE, income tax and corporation tax returns).
• Bank accounts and pensions.
• Credit reference agencies.
• Credit and debit card accounts.
• Online payment providers such as PayPal.
• Foreign tax jurisdictions (including treaties and automatic exchange agreements) and the common reporting standard.
• Government agencies such as Companies House, the Land Registry and the Border Agency.
• Online social networking.
• Property websites such as Zoopla and Rightmove.
• Amazon, eBay, Gumtree and similar sales websites.
• Google Street View.
• Council tax records.
• DVLA records.
• DWP records.
• Electoral roll.
• Insurance companies.
• Charities Commission.
• Flight sales and passenger information.