Let Property Campaign – HMRC Letter Targets Landlords with Undeclared Rental Income

10/09/2022 - 10 minutes read

Let Property Campaign is a long-running disclosure opportunity aimed at residential property landlords who need to bring their tax affairs up to date. We have recently seen a surge in the number of enquiries relating to letters received from HMRC about income from letting property and let property campaign.

The Let Property Campaign is designed to encourage landlords to inform HMRC of any rental income that they have not disclosed previously and it is an opportunity for landlords who owe tax through letting out residential property, in the UK or abroad, to get up to date with their tax affairs in a simple way and take advantage of the best possible terms.

If you’re a landlord and you have undisclosed income, you must tell HMRC about any unpaid tax now. You’ll then have 90 days to work out and pay what you owe.

HMRC receives data from numerous sources about rental properties, including Letting agents, Land Registry, Council records, Mortgage applications and Tip-offs.

HMRC’s sophisticated Connect system has the ability to analyse data from numerous sources and flag taxpayers who do not appear to have paid the correct amount of tax. This powerful tool enables HMRC to frequently write to taxpayers and invite them to use the Let Property Campaign to bring their affairs up to date.

If you have not declared your rental income you should urgently come forward and do so. Otherwise, you will be charged penalties for “deliberate and concealed” behaviour.

Who can use Let Property Campaign?

The Let Property Campaign is an opportunity open to all residential property landlords with undisclosed taxes. This includes:

• – those that have multiple properties
• – landlords with single rentals
• – specialist landlords with student or workforce rentals
• – holiday lettings
• – renting out a room in your main home for more than the Rent a Room Scheme threshold
• those who live abroad or intend to live abroad for more than 6 months and rent out a property in the UK, as may still be liable to UK taxes

Who cannot use Let Property Campaign?

Let Property campaign is not open to those landlords who are letting out non-residential properties such as:

• – shop
• – garage
• – lock up

You also cannot use the Let Property Campaign if you want to disclose income on behalf of a company or a trust.

How to take part in the Let Property Campaign?

To take part in the Let Property Campaign you should:

• – tell HMRC that you want to take part in the Let Property Campaign (Notify)
• – tell HMRC about all income, gains, tax and duties you have not previously told them about (Disclose)
• – make a formal offer
• – pay what you owe
• – help HMRC as much as you can if they ask you for more information

To benefit from the reduced penalties offered, HMRC will take account of the level to which you have helped them and the accuracy of the information you provided.

What will be the penalty rates if I use Let Property Campaign?

The penalty percentage will fall within a range. This range will depend on HMRC’s view of the type of behaviour and whether the disclosure was unprompted or prompted. The following table shows the penalty ranges.

Type of behaviour	Unprompted or prompted disclosure	Penalty range
Non-deliberate *Non-deliberate does not apply to failures to notify waste disposals at unauthorised waste sites	Unprompted — within 12 months of tax being due	0% to 30%
Non-deliberate *Non-deliberate does not apply to failures to notify waste disposals at unauthorised waste sites	Unprompted — 12 months or more after tax was due	10% to 30%
Non-deliberate *Non-deliberate does not apply to failures to notify waste disposals at unauthorised waste sites	Prompted — within 12 months of tax being due	10% to 30%
Non-deliberate *Non-deliberate does not apply to failures to notify waste disposals at unauthorised waste sites	Prompted — 12 months or more after tax was due	20% to 30%
Deliberate	Unprompted	20% to 70%
Deliberate	Prompted	35% to 70%
Deliberate and concealed	Unprompted	30% to 100%
Deliberate and concealed	Prompted	50% to 100%

The quality of disclosure (telling, helping and giving) determines where the penalty will fall within the penalty range. The reduction HMRC give depends on how much assistance you give them. For:

• – telling HMRC give up to 30%
• – helping HMRC give up to 40%
• – giving access to records HMRC give up to 30%

When HMRC work out the quality of disclosure, they will also consider how long it’s taken you to disclose the failure to notify. If it’s taken you a long time (such as 3 years or more) to make a disclosure, they will usually restrict the maximum reduction they give for the quality of disclosure to 10 percentage points above the minimum of the penalty range. This means you will not benefit from the lowest penalty percentage that’s normally available.

What will be the late payment interest rates if I use Let Property Campaign?

HMRC interest rates are set in legislation and are linked to the Bank of England base rate. There are 2 rates:

• – late payment interest, set at base rate plus 2.5%
• – repayment interest, set at base rate minus 1%, with a lower limit of 0.5% (known as the ‘minimum floor’)

You can use this form to work out interest and penalties for tax years ended 5 April 2003 to 5 April 2021.

We cover the preparation & submission of disclosure to HMRC in a separate article here.

If you failed to notify HMRC about receiving letting income

When you start to receive letting income the latest you should tell HMRC is by 5 October after the end of the tax year for which you start to receive that income.

If, for example, you have tax to pay on rent from a property in the tax year 2021 to 2022, you need to let HMRC know by 5 October 2022.

If you failed to register for a Self Assessment tax return by the appropriate deadline you’ll have to pay HMRC what you owe for a maximum of 20 years.

If you have taken reasonable care

If you registered for a Self Assessment tax return by the appropriate deadline, and have taken care to make sure your tax affairs were correct but you have still paid too little, you’ll only have to pay HMRC what you owe for a maximum of 4 years. This means you:

• – will need to make sure that your tax affairs for the current and later tax years are accurately reported on tax returns by the appropriate deadlines
• – will need to make sure that your tax affairs for the year prior to the current tax year are reported on the tax return that was issued to you for that year by the appropriate deadline
• – have to complete the disclosure form and pay HMRC what you owe for the 3 years prior to this

If you did not take reasonable care

If you registered for a Self Assessment tax return by the appropriate deadline but you have paid too little because you were careless, you’ll have to pay HMRC what you owe for a maximum of 6 years. This means you:

• – will need to make sure that your tax affairs for the current and later tax years are accurately reported on tax returns by the appropriate deadlines
• – will need to make sure that your tax affairs for the year prior to the current tax year are reported on the tax return that was issued to you for that year by the appropriate deadline
• – have to complete the disclosure form and pay HMRC what you owe for the 5 years prior to this

If you deliberately misled HMRC about this income

If you have deliberately paid too little tax you’ll have to pay HMRC what you owe for a maximum of 20 years.

HMRC expects most people to have to pay a maximum of 6 years but there will be some who need to pay more. These are people who have either:

• – deliberately told HMRC they have earned less than they have
• – not told HMRC anything at all about their income

How can MCL Accountants help?

Contact MCL Accountants on 01702 593 029 if you need any assistance with responding to HMRC’s letter about the Income from the Letting Property / Let Property Campaign or if you need any assistance with the preparation and submission of your business accounts or self-assessment tax returns to HMRC.