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Let Property Campaign

Can I use the LPC for this particular client circumstance?

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Hello. Just been approached by a client referral with 30+ years of undisclosed rental income, plus a couple of property sales! I 'm making inital enquiries of the 'new client' - sounds like about 5 different flats bought with mortgages over that period, and a couple of sales. It's possible that CGT covered by AE's of husband and wife, and perhaps not much in the way of rental profits, but I don't really know yet. There seems no valid excuse for non-declaration. They have both just received letters from HMRC Compliance, which are headed "Undeclared Income from Property" and are from "Campaigns and Projects", but are unsigned by any HMRC Officer. The letters say "We are writing to you because you may get income from property.....If you have not told us about all of your income from property, you must declare this by completing a Self Assessment tax return." This is not therefore an 'enquiry' letter. I'm wondering if I can/should use the LPC to make this disclosure for the last 20 years. It is not now unprompted, but the letter seems rather benign, and the LPC guidance on also seems a bit vague on this. I don't really want to complete 20 years of SA Returns! Any thoughts/advice would be appreciated. (I will be leaving this one for next month, but just want to give some initial holding advice, as they are quite stressed, albeit they have brought this upon themselves.)  



Replies (4)

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By Paul Crowley
13th Jan 2021 21:12

Based on prior dealings with such clients, I would pass without all money up front.
If people knowingly evade tax for such time, you will be last on their chosen payment list.

Thanks (1)
By Wanderer
14th Jan 2021 03:51

Yes, you can use LPC, dependent on types of property rented.

Although you say you don't want to complete x years of tax returns you effectively have to do this in order to work out the tax rates & calculate the liabilities. You have to complete / amend tax returns for the last couple of years even if you use the LPC.

It is now prompted so penalties will be higher. Keep within all LPC timescales to mitigate penalties as far as possible.

Don't overlook that you will need to make a Money Laundering Report unless you hold a relevant qualification.

Whilst accepting what Paul says my experience is that this sort of work can be quite interesting / rewarding with some very grateful clients at the end. It can however be quite a trawl to extract all relevant information out of the clients unless they have been highly organised in keeping records. Consider obtaining payments on account as it can often take many months to resolve.

Remember that you will be doubling up certain aspects of the work as you will need to register / disclose H + W separately. Also if they haven't disclosed this rental income over such a long period in my experience some other non disclosure crawls out of the woodwork as work progresses which you will also have to deal with. You will likely need to be in a position to discuss tax planning as sometimes the clients will need to sell one of the properties and / or remortgage to settle the liabilities.

Do it all digitally but be aware that you often have to repeat the disclosures manually when the LPC office raises any queries.

Although you mention 'benign' & 'this is not an enquiry letter' it is, in fact, much more serious. Make the clients aware of this in no uncertain terms but don't judge, just handle it professionally. There may be a mountain to climb but it is climbable.

Sounds like a big one to cut your teeth on if you have no previous LPC experience. Good luck!

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Replying to Wanderer:
By gouldltd
14th Jan 2021 10:43

Thank you - that is so helpful, and just what I wanted to know.
I have dealt with quite a few LPC's before, and these 'tax-payers' have already asked how much to pay up front, and I will be billing as I go. I do realise I have to do all the work, just didn't want to have to fill out/submit SA Returns on top.
The only one I've done where HMRC found them first was for a much bigger liability, and it was a formal enquiry from the start, so dealing directly with a named Inspector. It went back almost 20 years, with 2 significant property sales (tax of £100K's), but the Inspector chose to only go back 4 years, and reduced the penalty rate at my first request! (There were mitigating circumstances, but even the client felt he got off lightly.) It does seem that HMRC are particularly lenient with a lot of undeclared rental income cases, hence why I was wondering whether there was another way of dealing with it - with LPC, there is no option but to declare all years and apply the appropriate rate of penalty, whereas a formal enquiry seems to offer the possibility of a lesser number of years. Anyway, I'm not in the business of assisting them to avoid tax, but I felt I should see if there was an alternative approach.

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By Justin Bryant
14th Jan 2021 09:06

I always find it interesting to compare & contrast how LPC tax evaders are treated by HMRC (barely a slap on the wrist, if that) with loan charge taxpayers (who did perfectly legal EBT tax planning and yet many have resorted to suicide due to HMRC's relentless persecution there - as mentioned again by KG recently).

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