By Ola Sulaimon
IN the UK, individuals that earn income from letting property normally pay tax on their rental income. The tax would be applied on the rental profit rather than the rental income.
HMRC's main concern, however, is there are lots of landlords in the UK that receive rental income both in the UK and abroad without paying tax.
This became more of a concern when HMRC decided that interest from loan and mortgages would be disallowed as an expense by 2020. Most of the expense from letting a property out is usually this expense and therefore more tax will be recovered from the tax payer.
The new plan
HMRC introduced a scheme referred to as the Letting Property Campaign. Under this campaign, they want taxpayers that have received rental income in the past 20 years to voluntarily declare their rental income. They have also warned that this campaign is within a short window that will be closed at some point.
Some taxpayers have already started receiving letters from the letting campaign units requesting for declaration of their rental income.
What to do?
If you have received rental income but have not received a letter, it's advisable to voluntarily declare all this rental income before they send this letter or before the window closes.
If you voluntarily use this scheme, HMRC has said that your penalty on the tax unpaid could be 10 per cent if it's an unprompted disclosure or 20 per cent of the unpaid tax if it's a prompted disclosure.
If this opportunity is not taken, the penalty could be from 30 per cent to 100 per cent on the unpaid tax depending on the behaviour of the tax payer. Also, they will apply interest on the unpaid tax.
The fear of taxpayers, that have received rental income for up to 20 years, is not being able to afford to pay all this tax accrued over the years. HMRC has also reassured individuals that are caught by this that they can make payment arrangements over a period to cover this unpaid tax.
It's advisable for taxpayers or businesses that have received rental income and have not declared this to take up this scheme before the window finally closes.
To find out more contact Ronzl Accountants Ltd, 51 Billing Road, Northampton on 01604 965826 or see the website at www.ronzlaccountants.co.uk