Undeclared rental income

Non-resident landlord with 17 years undeclared

Didn't find your answer?

I have just been approached by new clients who is an overseas landlord and about to fill-in an NRL1 form.
In the conversation it became clear that she had been out of the UK since 1999, and had never declared rents before. It may well be that very little is owed, as the rent is not high, and there was always the personal allowance, but I'm wondering how best to approach HMRC. I know that they can go back 20 years, though I don't know how easy it will be to get that information together.
Is there a way of approaching them and giving them the figures for the past six years? Has anybody else had an experience of outing somebody for many years worth of rental profits.

Replies (8)

Please login or register to join the discussion.

Jennifer Adams
By Jennifer Adams
23rd Aug 2016 18:51

HMRC always get to know about the renting. If not now then when your client comes to sell. See here for a list of the various cunning methods as to how they get to know!
https://www.accountingweb.co.uk/tax/personal-tax/hmrcs-property-tax-camp...

Your clients non declaration is exactly why the Property Tax Campaign was one of the first to come into being and why when all others opened and closed the Property one remains open.
You need to come clean. On the form there is a box that you tick if you want to declare more than 4 years worth. You need to do this even though there may be no tax to pay. Income has been received and as such should have been declared even if no tax results.

Thanks (0)
James Reeves
By James Reeves
23rd Aug 2016 19:28

Are you sure that HMRC are unaware? Presumably the tenants (or rental agency) have been deducting tax for the last few years before paying the landlord?

Thanks (0)
Replying to James Reeves:
.
By pacta
24th Aug 2016 09:18

I've never found a single tenant (or agent) that has correctly withheld 20% tax and paid it to HMRC in these circumstances. It is just not on their radar.

Thanks (0)
avatar
By David Treitel
24th Aug 2016 09:10

Has the income been declared in the country of residence? If not, have you considered reporting this to your MLRO?

Thanks (0)
avatar
By michaelblake
24th Aug 2016 13:09

The guidance on how to declare undisclosed rents under the HMRC Let Property Campaign is here https://www.gov.uk/let-property-campaign

Hmrc will normally only be interested in 6 years tax if either (a) the omission was careless and not deliberate, or (b) if the amounts for years earlier than that are trivial

If the decision not to declare the rents was deliberate and the amounts for earlier years were not trivial HMRC could go back years 20 years as you note and in some cases may prosecute.

Thanks (0)
avatar
By Martin B
24th Aug 2016 13:14

Refrence for future.

Thanks (0)
avatar
By jlsTax
24th Aug 2016 17:13

Bear in mind that the obligation to deduct tax falls on the Agent or Tenant. The non-resident landlord scheme is an option for the landlord to take - an NRL 1 is not an obligation on the Landlord - it just avoids the withholding and allows tax to be paid by the landlord under SA.

Unless the net rental amounts are significant (i.e. about Basic Rate Band), the withholding by the agent/tenant should/will have covered any tax due.

I'm not sure you yet know whether there was a failure to deduct.

I would therefore suggest that, unless your client has been party to any failure to deduct, perhaps by giving UK address/bank details, his position may be better than you think.

Thanks (0)
Replying to jlsTax:
avatar
By Igor Nankun
24th Aug 2016 18:03

Sorry, I don't agree with this. The NRL scheme differs in its mechanics from other schemes of tax "deduction". It is actually technically (in its mechanics) a withholding of (the landlord's own) tax, and not a tax deduction (of the payer) giving rise to a credit.

Whilst it is the case that if the non-resident landlord never pays the tax, HMRC can go after the agent/tenant for the tax that should have been withheld and paid over to it. All of it (tax included) is the landlord's money though.

If the rent was £1,000, from which the tenant/agent should have withheld £200, sending only £800 to the landlord, but instead nothing was withheld and £1,000 was sent to the landlord, in whose hands is the £200 that should have been sent to HMRC?

Registering under the NRL scheme avoids the withholding, but it does not take away the liability; it just puts a patsy in place to "take the wrap" in the event that no tax is withheld and the tax isn't forthcoming from the landlord.

Thanks (0)