Share this content

15 years of tax returns not completed

Advise re best way forward

Didn't find your answer?

Hi,

Wondering if anyone canĀ advise as to how to tackle this? Husband and wife have had property income from 06/07 but never reported to HMRC. They have panicked now as HMRC asked the husband for a 2020 return. They both have employment income in all of those years.

What is the best way to advise HMRC to minimise any penalties etc?

Replies (21)

Please login or register to join the discussion.

avatar
By Michael Davies
07th Dec 2021 10:02

Just send HMRC your spreadsheet,detailing all the income and tax credits plus your comps.Then wait for the reaction.

Thanks (0)
avatar
By Wanderer
07th Dec 2021 10:10

murphy1 wrote:

What is the best way to advise HMRC to minimise any penalties etc?

Let Property Campaign.
Thanks (2)
avatar
By David Ex
07th Dec 2021 10:11

Is the Let Property Campaign still running? I thought that used to be the recommended route.

Thanks (0)
avatar
By rmillaree
07th Dec 2021 10:35

Urgently contact hmrc to start disclosure process - you don't hmrc to come knocking whilst you are deciding about how best to proceed!

https://www.gov.uk/government/organisations/hm-revenue-customs/contact/m...

Thanks (1)
By Duggimon
07th Dec 2021 10:50

If there is going to be penalties once this is ultimately sorted, you can reduce these substantially by advising HMRC about the undisclosed income before they ask if there has been undisclosed income.

The LPC is still running, I would suggest they contact them now then get you everything you need to hit the 90 deadline and advise of the tax due.

Thanks (2)
Lisa Thomas
By Lisa Thomas
07th Dec 2021 11:46

I know an accountant who specialises in dealing with these types of claims for landlords. Happy to put you in touch if that's not insulting.

Thanks (0)
By ireallyshouldknowthisbut
07th Dec 2021 14:15

If you have not done this sort of thing before, this is probably not the one to start on.

The rules here are complex and it might be they need to report the lot, they might not depending on their circumstances.

They key is not to panic, and work through it methodically. Find a property / back taxes specialist. There are likely to be lots of costs which they don't have receipts for for example, and the rules on letting changed several times in this period so these things tend to be rather multi-layered.

But yes, its going to be let property campaign time. They are still around, just about, but heavily understaffed.

Thanks (1)
avatar
By gillybean04
07th Dec 2021 17:32

https://www.gov.uk/government/publications/compliance-checks-penalties-f...

Their "helpsheet" on what factors they consider when calculating a penalty for failing to notify. Note that it is only for failure to notify (which I'm assuming is the case if they've panicked upon receiving a request for a return). There's a different sheet if they were in SA for any of the years & submitted an inaccurate return.

Thanks (1)
RLI
By lionofludesch
07th Dec 2021 17:59

It's nice to know that HMRC catch up with defaulters in the end.

Thanks (1)
avatar
By Calculatorboy
07th Dec 2021 23:26

I don't act for clients like that on the grounds that the fees will be huge and they will eat my time

Thanks (0)
Replying to Calculatorboy:
By SteveHa
08th Dec 2021 12:30

Nah, most LPC disclosures are fairly straightforward. The time is preparing the calcs for each separate year, but even that can be streamlined.

Bear in mind the majority will be based on known rental income per year, and client's own summary of costs, with possible finance cost restrictions in recent years.

A spreadsheet to handle it is easily constructed.

Thanks (0)
Replying to SteveHa:
avatar
By Calculatorboy
13th Dec 2021 18:45

Wouldn't touch clients like that..hardly quality are they? 15 years then panic..you'd need fees upfront because otherwise you will be their last priority particularly if theres a sizeable liability ..and can you imagine what other delights will crawl out of the woodwork after they engage you ?

Thanks (0)
avatar
By More unearned luck
08th Dec 2021 19:41

If the headline was correct your clients would owe a large fortune in late filing penalties, late payment penalties and possibly determinations.

But it is more likely that there has been 15 years of failing to notify liability. As others have said, the LPC is the way to go.

You need to establish why HMRC have issued an NTF for 2019/20 for H and not for W and not one for either for 2020/21. If it is because HMRC know or suspect the undeclared income you will have a prompted disclosure. It seems that any disclosure by W would be unprompted, meaning that she is in a better place as regards penalties.

Why didn't they tell HMRC at the time?

They only have problems in years where there is a profit not eliminated by losses b/fwd.

Thanks (0)
avatar
By 2003bluecat
10th Dec 2021 10:23

I'd get a copy of that NTF if you haven't already and make sure it is that and not a prompt for undisclosed letting income.

If it is regarding the later, as others have said, LPC is going to be the way forward.

In this case the first port of call would be to tell HRMC you are making a disclosure under the LPC and make sure you get a COMP1a sorted for both parties so that you can discuss the LPC with HMRC (might be obvious but it can really help - especially in getting historical PAYE figures for the individual(s)).

LPC's can be time consuming - and again as others have mentioned setting up a spreadsheet and getting the relevant information is going to take up the vast majority of your time, as well as compiling all the changes in income tax rates, interest rates and letting rules over the reporting period.

As a guide, we charge what we currently charge for a property + PAYE tax return for each of the years undisclosed, charge 50% up front and the balance prior to submission. This may seem high but you cannot underestimate how long just getting the relevant information from the client can take.

It's a pain but can be a good fee, and you do get 90 days from notifying HMRC about your intention to make a disclosure so it would push you past the January deadline if that's a concern for you (in my experience they are reasonable in extending past 90 days too, especially considering the difficulties in accessing such historical information).

Once you've done one they are all much easier.

Thanks (0)
avatar
By Graham Suggett
13th Dec 2021 10:03

As an ex-HMRC Tax Inspector, I'd recommend full disclosure without delay.

Make use of the LPC and the lower penalties (likely) to be offered:

https://www.gov.uk/government/publications/let-property-campaign-your-gu...

Double / triple check that your clients have no other undeclared income from the same period. If they do and don't declare it (and HMRC make a discovery) then they can forget the lower penalty and HMRC may not play as nice.

Thanks (1)
avatar
By Jack the Lad
13th Dec 2021 12:35

I have dealt with many such cases over the years. The replies so far have been helpful. My advice is be methodical:
1. Prepare the joint Income and Expenditure schedules for all years. Make sure you claim all allowable expenditure including admin costs, and 10% wear & tear allowance if relevant.
2. Review the tax position for each person separately for each year, calculating the tax liability accordingly.
3. Notify HMRC making a full disclosure under the Let Property Campaign and wait for a response.
4. Make an offer of Settlement. The last client and his wife who had exactly the same problem and came to me, were lucky that HMRC only wanted to go back 6 years, with no penalties.
Good luck!

Thanks (1)
Replying to Jack the Lad:
avatar
By More unearned luck
14th Dec 2021 16:55

Step 1 should be: give notice to HMRC via LPC portal that the client intends to make a full disclosure. Brownie points will be carelessly lost if this is not done and HMRC discover for themselves that the client has received undeclared rent before Jack's step 3 (to be renumbered 4) is reached.

Thanks (0)
avatar
By North East Accountant
13th Dec 2021 13:59

Let Property Campaign.

Accessed via Digital Disclosure Service.

Thanks (0)
avatar
By Software Seeker
13th Dec 2021 15:29

Disclose, disclose and disclose. And be super helpful and prompt when/if HMRC ask questions. Oh, and don't omit anything (obviously). Having one eye on, and managing, any ultimate penalty position, is essential.

Thanks (0)
avatar
By Software Seeker
13th Dec 2021 15:29

Disclose, disclose and disclose. And be super helpful and prompt when/if HMRC ask questions. Oh, and don't omit anything (obviously). Having one eye on, and managing, any ultimate penalty position, is essential.

Thanks (0)
Morph
By kevinringer
14th Dec 2021 06:47

I've used the Let Property Campaign. It used to be easier on the old HMRC website than the existing GOV.UK because the old site was more intuitive with more online help. Get them registered and that will give you a bit of breathing space to put the figures together. In my experience the LPC outcome is vastly more favourable than if HMRC flexed its muscles. Also, the LPC team at HMRC are very helpful.

Thanks (0)
Share this content