Landlord possible penalties for late registration for self assessment

Landlord possible penalties for late...

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Client started renting out a property in November 2013 but hasn't told HMRC yet. Works full time on PAYE as his day job.

So late registration for self assessment and 13/14 tax return is of course late too.

If client registers for self assessment ASAP and wings in a tax return as soon as he gets his UTR what are the potential fines and penalties he might get? Is he likely to get the £100 + £300 + £10 per day from 1st May?

Very little profit in that period .. possibly around £800 (mortgage interest gobbles up most of the income) in the 5 months from Nov to 5th April.

Replies (11)

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By levelheaded1903
01st Jul 2015 18:13

Hi he should have notified hmrc by 5/10/14, and yes the tax return should have been submitted if online by 31/1/15. Automatic £100 penalty, £10 per day when return more than 3 months late up to 90 dats - £900 plus interest on the potential lost revenue calculated from 31/1 the due date, and when the tax is paid over. I think interest charges also apply to late payment of penalties. The £300 penalty, or 5% of tax liability, whichever is higher would be paid if return more than 6 months late so that would kick in at the end of July.

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By Discountants
01st Jul 2015 18:26

Tax return is not late as it hasn't been issued yet!

The above advice is correct regarding when he should have notified HMRC but incorrect regarding the deadline for the tax return

Actually there will be no penalties for late filing as HMRC has not issued a tax return yet!

The deadline for 2013/14 is the later of:

31st January 2015

Three months from the issue date of the Tax Return.

So complete an SA1, wait for the tax return to be issued and complete it within the 3 month deadline and no penalties for late submission will apply

 

Now there may be penalties for late registration for SA but I find that these are rarely applied.

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By The Wycher
01st Jul 2015 18:39

Let Property scheme

Hi 

There is also the let property campaign which can deal with disclosures now for 2013-14. this will however trigger penalties of about 10% (plus interest) depending on the rate you select.

 

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By levelheaded1903
01st Jul 2015 19:11

But, if he should have notified HMRC by 5/10/14 and he didn't, then HMRC would be in no position to know to issue him with a tax return - because they would not know about the income. So, he didn't notify - I am not so sure that one can sit back, disregard the notification date of 5/10 following the tax year, and then say, well HMRC didn't issue me with a notice to complete, or else others would take advantage. Haven't actually experienced the exact same scenario - but I would be surprised if that was the case?

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Replying to NH:
By Paul D Utherone
02nd Jul 2015 08:37

Following on from Basil

levelheaded1903 wrote:

But, if he should have notified HMRC by 5/10/14 and he didn't, then HMRC would be in no position to know to issue him with a tax return - because they would not know about the income. So, he didn't notify - I am not so sure that one can sit back, disregard the notification date of 5/10 following the tax year, and then say, well HMRC didn't issue me with a notice to complete, or else others would take advantage. Haven't actually experienced the exact same scenario - but I would be surprised if that was the case?


 ... if the rents were >£2.5k so one could not wave the HMRC 'you don't need to make a return' answer from their website  deal with this informally, then yes it I the case that there would be no filing penalty as no return had been issued, but there would be a late notification penalty (based on tax lost). Once HMRC require a return with less than three months to the normal filing date (so for 2013-14 they require a return after 31/10/2014) then the date for making the return on either paper, or electronically, is 3 months from the date the return is required.
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By levelheaded1903
01st Jul 2015 21:19

Wow thanks for that Basil put me right and something I have never come across so you learn something new every day!

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By anneaccountant
01st Jul 2015 22:22

Fantastic reply Basil thank you so much.

So what you are saying is that if the rental profit is below 2500 per annum no tax return is required even if they have other taxable income.

All they need to do as per your draft letter is to advise hmrc of the liability and agree to pay up. Seems a slightly strange arrangement given the existence of self assessment tax returns but I know from past answers of yours that you know what you are talking about.

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By anneaccountant
01st Jul 2015 23:08

Thank you Basil .. My client will be pleased to hear that they should not have any fines to pay

Enjoy the England Japan game if you are staying up!!

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By Wall1690
02nd Jul 2015 15:55

A Tax Return is only NOT required if gross rent before expenses is under £10000 AND net rent after expenses is under £2500.

 

Did the OP say anywhere that the gross rent was less than £10000? 

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Replying to Duhamel:
By Paul D Utherone
02nd Jul 2015 18:14

It's implied

Wall1690 wrote:

A Tax Return is only NOT required if gross rent before expenses is under £10000 AND net rent after expenses is under £2500.

 

Did the OP say anywhere that the gross rent was less than £10000? 

in one of her answers ... and of course that is HMRC's interpretation which Basil is turning back on them in relevant circumstances to possibly get around a notifiction penalty.

And as thehaggis says any notification ought to be wholly mitigable if unprompted

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By thehaggis
02nd Jul 2015 16:58

Tax Returns

This has nothing to do with tax returns.  The "offence" is a failure to notify, which attracts a penalty under sch 41 FA2008.

An unprompted disclosure made within 12 months of the proper due date for the tax (in this case 31 Jan 2015) carries a penalty in the range of 0% - 30% of the tax that is due.  Assuming this is a simple case with a full disclosure the penalty will be 0%.

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