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Let Property Campaign - 20 Years!

Let Property Campaign - amend tax returns for 20 years?

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Hi,

Can you help?

I have just taken on a new client who had recently done their own tax return.  During our initial meeting, the rental properties were discussed and it then transpired that they were owned jointly with his wife. His wife has no income. To cut a long story short, he put them on his tax return because he had to complete a return for his business.

I spoke to the Let Property Campaign helpline and they have said that I will need to complete 20 years worth of tax returns for her and amend his tax returns as well for the whole period.  I explained that there was 'no loss of tax to the exchequer' but they said I still needed to do it. She said there would be no penalties for the late submission of the tax returns because non were issued.

I tried to phone the Agent Dedicated line to speak to someone in the technical team but it cut me off because they busy.   

Has anyone else been asked to complete all of the Tax Returns to get a client up todate?  Luckily, my client does have everything going back 20 years.

Replies (21)

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By Wanderer
26th Oct 2020 12:12

You don't complete tax returns for disclosure under the LPC.

You mention that she has no income. Did half of the rental profit exceed her personal allowance? If not then no need to do anything on her.

You are unlikely to be able to amend his tax returns for 20 years. Be careful, you could easily be in a position of paying the tax on her but not being able to recover on him.

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Replying to Wanderer:
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By Dinks
26th Oct 2020 12:29

She stopped working about 15 years ago, but was always well within the basic rate band. After she stopped work, the rental income would have been well within her personal allowance. Except, they sold one of the properties in 2016/17 and he paid all of the tax.

I've tried the Agent line again but it says they are too busy and they hang up!

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Replying to Dinks:
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By Wanderer
26th Oct 2020 12:35

[*** wrote:
]

She stopped working about 15 years ago, but was always well within the basic rate band. After she stopped work, the rental income would have been well within her personal allowance. Except, they sold one of the properties in 2016/17 and he paid all of the tax.

I've tried the Agent line again but it says they are too busy and they hang up!

In which case it looks like you are completely on the wrong track and are considering the wrong tax. That coupled with the fact that you are ringing the LPC office then the ADL are you sure that you have sufficient experience to handle this?
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Replying to Wanderer:
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By Dinks
26th Oct 2020 12:51

Thank you for your comments.

I rang the ADL in the hope of being put through to someone in the Technical team. As there is no loss to the exchequer, I'd hoped they would consider that.

They still have rental properties and therefore going forward it needs to done correctly

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Replying to Dinks:
My photo
By Matrix
26th Oct 2020 15:09

I had a similar query and spoke to technical who said to write in and say there is no loss of tax so I assume they will not be requiring earlier returns. I am just about to send the letter. Amended 2018-19 and 19-20 returns have been filed.

https://www.accountingweb.co.uk/any-answers/correcting-rental-income-on-...

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Replying to Matrix:
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By Dinks
26th Oct 2020 16:11

Not sure what is so special about today but the Agent Dedicated Line keeps saying everyone is busy and then cuts me off. I am not even allowed sit in a queue

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Replying to Dinks:
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By Wanderer
26th Oct 2020 16:41

Really don't understand why you continue to try to speak to ADL. Phone advice from HMRC is variable at best. For example:-
Despite what you say the LPC office have told you, you will not be able to amend H's tax returns for the 20 years.
Despite what you say the LPC office have told you you will not be able to complete 20 years returns for W.

Additionally if we take all you say at face value then there is going to be overpayments of tax, both IT & CGT.

Why not just concentrate on the in-date years, correct these and claim the overpayments?

Can't help thinking you have reached your 'no loss of tax to the exchequer' argument / conclusion and are looking for some validation of this from HMRC.

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Replying to Dinks:
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By Paul Crowley
26th Oct 2020 16:55

It has been like that since March 20

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Replying to Dinks:
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By Paul Crowley
26th Oct 2020 16:53

Try 08.30 am for agent line

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Jennifer Adams
By Jennifer Adams
26th Oct 2020 18:34

See here:
https://www.gov.uk/government/publications/hm-revenue-and-customs-disclo...

The heading says... "Use this service to make a disclosure if you, your company or client have not declared all income or gains"

She's not declared all of her income so yes... she should declare. You come across this all the time - client says that they have declared but then you find thaat they've done so on the husband's return when they should have been 50:50 (or whatever the underlying split is).

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

This link says 'HMRC has produced a calculator that you may be able to use to work out what you owe. This can be used to work out interest and penalties that are due on tax liability for up to the previous 22 years."
Also:
"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."

So...technically (note the work 'technically') ... you could have to declare back 20 years.
However, HMRC will only do so in a very serious investigation.
The campaign declaration form lets you go back 6 years.
So do six years and make a note on the form that there has been a declaration to HMRC albeit fully on husbands return but 'as can be seen from the years declared there has been no loss to the Revenue' and see what they say.
They should be OK with that.

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Replying to Jennifer Adams:
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By Wanderer
26th Oct 2020 18:47

Jennifer Adams wrote:

The campaign declaration form lets you go back 6 years.

Nope, you can go back much further.
Jennifer Adams wrote:
So do six years ....

And what liabilities are you suggesting the OP discloses for that six years? Hint: see the Op's post 26th Oct 2020 12:29.
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Replying to Wanderer:
Psycho
By Wilson Philips
26th Oct 2020 19:01

Who is “you”? Jennifer’s point, I believe , is that the taxpayer can make a disclosure for only 6 years should they choose, not that the form allows 6 years only. It would be up to HMRC if, based on the disclosure, they chose to go back further.

But I agree on the nil liability point.

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Replying to Wilson Philips:
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By Wanderer
26th Oct 2020 19:05

'You' is anyone who uses the LPC disclosure route.

Which is for people who have undisclosed tax liabilities, which W doesn't have for the six years that Jennifer is proposing.

And under the "If you failed to notify HMRC about receiving letting income" section of the LPC HMRC advise "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.".

The six years that you mention is for people who were registered for SA but fall under the 'careless' umbrella.

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By richard thomas
26th Oct 2020 21:49

To quote one of the late, great Graham Chapman’s characters, this is all getting very silly.

What we have here is a husband who has taken it upon himself to pay tax on his own and his wife’s rental income and capital gains as if “independent taxation” had never happened, oblivious, or not caring, that he, or rather the couple, has paid too much tax.

This has nothing to do with HMRC’s Let Property Campaign which is about people who have paid too little tax.

The husband has either paid the tax on the basis that he was entitled to half the rents and was in receipt of the other half (we don’t know what the banking arrangements were) and so paid as trustee (see CIR v Martin among others) or he has simply paid his wife’s tax on her behalf without her notifying liability or making a return. Either way she is treated as having received income net of tax or as having paid tax.

On the facts as stated she was not liable to tax over the last 15 years. The question then is can she get relief for the overpayment? It seems clear that whatever the position she can only get relief for the last four tax years via a claim under s 33 and Schedule 1AB TMA for overpayment relief.

It is not clear on the exiguous facts whether CGT has been overpaid, ie whether the wife‘s annual exempt band was taken into account when paying the gain – it seems likely that it was not. If it was not, then CGT might fall within a claim for overpayment relief.

She had a liability to notify the chargeable gain which she has failed to do. She is liable to a penalty for that failure but the potential lost revenue will be nil, so no penalty is due.

All that is required now is a claim to overpayment relief for four years and a waving goodbye to overpaid tax for any years earlier than that.

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Replying to richard thomas:
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By Ajtms
28th Oct 2020 11:25

I have had a husband and wife in a similar position, but could not escape a penalty just because the wife had paid sufficient tax to discharge the husband's liability. Section 6(5) of FA2007 Sch 24 says that no account should be taken of the loss of tax being balanced by another's overpayment of tax. In the end I got the penalty deferred, but it was a struggle and had to threaten taking the matter to tribunal to get the deferral. There was no loss of revenue and in fact the government gained, because we could only reclaim the last 4 years of tax and for all earlier years tax was paid twice (once by each spouse). Fortunately only a couple of hundred pounds otherwise I would have used the trustee approach. Nevertheless I was not happy with HMRC charging a penalty when the exchequer had gained £200 from my client's oversight.

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Replying to richard thomas:
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By Justin Bryant
28th Oct 2020 12:31

I hesitate to respectfully disagree, but HMRC might not accept that (as suggested by Ajtms' above comment) unless perhaps there was a formal IIP for the wife's 50% share (even then I don't think that overrides the usual H&W joint ownership deeming rule which means (in the absence of a claim re actual BO) she's treated as receiving the 50% even if she doesn't in fact receive it and of course you can't file a tax return as nominee for someone else's tax liability).

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Replying to richard thomas:
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By Wanderer
28th Oct 2020 13:00

richard thomas wrote:

On the facts as stated she was not liable to tax over the last 15 years. The question then is can she get relief for the overpayment? It seems clear that whatever the position she can only get relief for the last four tax years via a claim under s 33 and Schedule 1AB TMA for overpayment relief.

Rather than try to enter into a some sort of argument that W should get overpayment relief, surely the easiest approach is just to apply for overpayment relief for H for 2 years and amend the 2019 & 2020 tax returns for H? All as alluded to in my 26th Oct 2020 16:41 post.
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By Michael Davies
28th Oct 2020 10:08

Hmm interesting.What did HMRC mean by completing 20 years tax returns ? Get one paper tax return and alter the dates ?Surely not ?Or do they mean submit a written return of income on a cows backside (yeah I know last time I looked HMRC subscribe format ).This happened with one of my clients,and I just submitted a spreadsheet ,which HMRC were prepared to settle liability on.The bit about HMRC technical being too “busy” is disturbing.I have a big repayment claim based on a termination loss which has been in abeyance for months.I am about to escalate,but it seems however hard I go in,it isn’t going to make any difference.

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Replying to Michael Davies:
Slim
By Slim
28th Oct 2020 13:19

I had the same client waited about 2 months then called up HMRC and lost their [***], less than 5 working days later they had the refund in their account.

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By djn
28th Oct 2020 11:09

I would not be looking at amending 20 years of records, especially as no tax is due.

I would maybe correct the last 4 years if you really wanted to. HMRC have not lost out so seems a pointless exercise from a risk perspective.

If the client wants the hassle of amending the last 4 years and paying your fees to correct it then go with that. It will probably take months to sort out and lots of chasing so I don't enjoy this type of case.

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By geoffmw1
28th Oct 2020 12:54

Miichael Davies's reply is the first sensible one and is clearly how I would have dealt with this type of situation when I was in practice.
There would have been times in the first 5 years that the wife might have used up her PA in employment income.

i

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