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Let Property Campaign

Is it always better than just filing tax returns?

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A new client hasn't been asked by HMRC to file a tax return since 2016/17.  I don't know why because he'd paid SA tax on a new self employment and investment income until then.

During 2017/18, he began to let the property he'd lived in and this continued until he sold it in 2019/20.  He wants to bring his tax affairs up to date and has asked me to file returns for him.  I calculate that he owes about £8k income tax but with no taxable gain on the flat.  He accepts that there'll be interest and penalties to pay, but of course wants to minimise the penalties.

It's some years since I dealt with my only let property campaign disclosure, so I'm not overly familiar with it.  I could simply file all three returns and wait to hear from HMRC, or I could register for an LPC disclosure for all three years.  Or I could file 2019/20 (still within 12 months) and register to disclose the two previous years separately.

Are the failure to notify penalties likely to be similar in any case?  It was a careless oversight - I think we're talking unprompted, and not concealed but I suspect it will be hard to persuade HMRC it wasn't deliberate.  I suspect the relatively small amounts at stake and the self assessed nature of LPC gives the best opportunity to mitigate the penalties but, on the other hand, it would be simpler (and lower cost in fee terms) just to file the returns.

Any thoughts/experiences appreciated.

Replies (15)

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By David Ex
20th Oct 2021 16:56

dwgw wrote:

it would be simpler (and lower cost in fee terms) just to file the returns.

Why would your fee be less to file 3 returns?

No experience of the disclosure campaign but, from what I’ve read, I can’t see why/how it wouldn’t give the most favourable outcome.

Also, if you start submitting returns, they’ll presumably keep requesting them for future years.

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Replying to David Ex:
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By dwgw
20th Oct 2021 17:43

There's no question that returns are due, and will continue to be in future. It's a mystery why HMRC stopped asking him to submit one when he always settled his tax via SA.

My concern over additional fee costs was to do with the time spent on the LPC process itself - the returns have to be prepared in any case to calculate the liability. The penalty saving would have to justify the extra fee cost, otherwise it would be better just to file the returns.

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Replying to dwgw:
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By Paul Crowley
20th Oct 2021 20:45

Let property campaign takes more time than preparing tax returns, end of
Did it once and my discover time was never compensated for
I am confused
Did your client submit returns?
Did he have an accountant?
If yes and yes then how could client "forget" that he was receiving income and not putting it on a return.
If returns are stopped letter from HMRC says quite clearly that if circumstances..................you must advise us
This is all a bit different from the employee who never has needed to complete a return

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Replying to Paul Crowley:
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By dwgw
21st Oct 2021 09:59

As I said, client submitted returns up to 2016/17, then HMRC stopped 'issuing' returns to him. They didn't write to say returns were no longer required.
I'm confused too, as he wasn't within PAYE and paid tax under SA.
He's disorganised and tardy but I don't believe there was ever an intention to conceal and he wants to bring everything up to date now. It's just a question of how best to do that.

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By CMP Accountant
20th Oct 2021 17:12

I assume that no SATRs have already submitted for the relevant years.

In which case I would definitely opt for disclosing all years under the Let Property Campaign- however, if HMRC have already issued notices to file I believe he is out of luck.

In my experience the Let Property Campaign team are very reasonable, and in cases where it was accepted to be 'careless' then our offer of 10% penalties were accepted.

You can more often than not get through to the Let Property Campaign team on the phone in under 5 mins, and I have always found them to be very helpful.

I wouldn't say it is a significant amount of work over and above simply preparing the tax returns, but it will unfortunately be something that drags on. It will likely take two months from submitting the LPS until it is actioned, and then if they reject the offer and ask for amendments then you have added another two months at least. Although - you could easily experience these delays dealing with the Self Assessment side of HMRC in any case.

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Replying to CMP Accountant:
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By dwgw
20th Oct 2021 17:46

That's correct, HMRC simply stopped asking him to file returns from 2017/18 onwards - no idea why - so it's late notification rather than late filing.

Thanks for that pointer. If I remember correctly, didn't LPC originally have a flat 10% penalty, before HMRC attempted to make penalties more scientific!?

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Replying to dwgw:
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By Paul Crowley
20th Oct 2021 20:49

They expect accountant to calculate the interest and penalty on the version 2 of campaign and it MUST be done their way

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Replying to Paul Crowley:
By SteveHa
21st Oct 2021 09:17

I'm not convinced. I've done a few, and I always calculate the penalties my way (interest is a no brainer - based on rates and dates).

Not had one declined yet.

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By Paul Crowley
20th Oct 2021 17:34

If the money is ready and will be paid when submitted, I would just file the returns.
I would be doing the returns on the software first before even thinking about the let property campaign.
Returns are not late if they were never issued

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Replying to Paul Crowley:
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By dwgw
20th Oct 2021 17:50

That thought has crossed my mind and, if it was just 2019/20, I'd simply file it. It's the earlier years having gone past the >12 months late notification that I'm not sure about. I don't know whether I'd be negotiating the penalty from a weaker position than if I went down the LPC route.

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Replying to Paul Crowley:
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By More unearned luck
20th Oct 2021 20:13

Deferring making the initial LPC contact increases the risk of HMRC finding out first thus converting an unprompted disclosure to a prompted one. (Best to assume that HMRC's claims about Connect are correct, even if they aren't).

Unless you foul it up a LPC disclosure leads to a contract settlement: no need to file returns except perhaps 2020 (ie the only relevant year capable of being filed electronically)

Filing 2020 and earlier returns will result in late payment penalties as there was no timely s 7 notice. OK if you were expecting a 10% carelessness penalty, but not if you are arguing for no bad conduct/0% pen or if HMRC impose the normal penalty regime for bad conduct (which would be on top of the LPPs).

Prompt LPC disclosure is best.

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Replying to More unearned luck:
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By Paul Crowley
20th Oct 2021 21:01

The one I did was to file returns for anything that was in the electronic capability and LPC the rest. Client was employee, no returns issued
It was prompted
No penalties for late payment or filing for the returns.
The tiny penalty was accepted on the LPC eventually, but client had paid all money straight away. I think HMRC just gave up on me because I was being difficult.
But being difficult takes more time than being cooperative
The returns were quick and easy
The earlier stuff took more time, even at start before adding on being difficult

But only ever had the one

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By Calculatorboy
20th Oct 2021 21:50

Avoid taking on clients like this ..they eat time. I refer them to citizens advice....phew...lucky escape

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By Southbankdelboy
20th Oct 2021 21:59

Currently dealing with 2 LPC cases and no doubt they take significantly longer than filing SA returns but found that as unprompted cases the 10% penalty rate would be accepted. Still not finalised yet after first offers being rejected. Now redone and faffing about having to complete a table with income/tax/penalty/interest then sending to client to sign and send off but revised offers were in favour of the taxpayer so all good there but more time spent on getting the job done. All years on LPC up to 19/20 with 20/21 being sorted through an SA Return.
One difference between SA Return and LPC is that the LPC calculation is simply the taxable property income at the taxpayers marginal rate. This is different to taking total income into account under SA as any older underpayments would/should have been dealt with through a PAYE coding.
Also I understand that when the LPC case is finalised HMRC pass details to the SA section to issue SA returns in future.
As already mentioned by others I have found the LPC staff to be very helpful even assisting with working out the interest.

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By STEVEGLOVER33
21st Oct 2021 12:38

My experience of utilising the LPC has not been good, it's time consuming and any small rejection of the figures, whether that be the penalty (you suggest) or the interest (you calculate) requires an entirely fresh submission

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