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Let Property Campaign Disclosure

How to begin a LPC disclosure if not Agents

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Hi AccountingWeb,

After a bit of advice if possible please. Potential client approached my firm and basically said they have 9 years of rental income that they have not declared and therefore not paid any potential tax on. They are also not registered for self-assessment. So, this would be a Let Property Campaign disclosure. I informed them of this provision. The potential client has not been prompted by HMRC and were made aware of this issue when a friend of theirs mentioned it to them, hence they contacted me. Problem is I have never had to do an LPC disclosure. Besides being aware of it and reading the guidance.

Cut a long story short, potential client moved out of their property and rented it out in mid 2011 and then moved back to live at their property in November 2020. The property was completely managed by a letting’s agency, so pulling together the information on the rents and expenses is pretty easy and straightforward.

They need to let HMRC know that they need to make a disclosure. The bit that I am not sure about, can I inform HMRC on their behalf (once I engage with them as a client)? Reading the guidance, it says that agents can fill in the Agents Digital Disclosure Service form and then the client can fill in COMP1a form to authorise HMRC to deal with the agent. Or is it better that they (1) register for self-assessment in the first instance as they have rent received in the 20/21 tax year (so this need doing anyway), (2) I get a 64-8 in place (3) I inform HMRC that a disclosure needs to be made.

I am going to try and ring their helpline on Monday, but I just wanted to see if I can go n better armed so to speak.

On another note, what you roughly charge for this type of work? Client doesn’t want expensive and also, I am not a charity service, so I am scratching my brain on what is a reasonable fee. At the same time they have benefited from untaxed income for so many years. The other side of the coin is I tell them to look for another accountant who has experience in this but also it would be good to get some experience in this.

I have been reading this post https://www.accountingweb.co.uk/any-answers/let-property-campaign-8 and have found it informative.

Thank you for your time.

 

Replies (7)

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By ireallyshouldknowthisbut
05th Jun 2021 12:06

I do half a dozen of these a year.

If you have never done one then you will need considerable research and advice. The let property campaign is helpful, but often the staff are completely wrong about key points about what you do/don't need to include, how to compute penalties etc. I once spend months debating mortgage interest until they conceded we do know what they are doing and they did not.

I would charge bare minimum 1.5 days for this and that's without the research. There are always issues arising about missing data going back this far, and if you make a reasonable effort to include all costs there will be a lot of to/fro with the client. HMRC always get angsty about the interest comps too, so if I got it done in under a day (spread over 2-3 weeks) I would be delighted.

64-8 would be the normal process for the 20/21 return. If you do that now, by the time the client has got your data and its hit the top of the pile it should be in place.

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Replying to ireallyshouldknowthisbut:
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By ShoulderShrug
05th Jun 2021 18:28

Thanks @ireallyshouldknowthisbut for the advice, I think maybe I should budget 2 days worth for this. A day to put together all the rental information and maybe a second day for dealing with HMRC/ Client.

I am hoping that because the potential client used a lettings agency for collecting rents and dealing with any property expenditure that compiling all the info should be pretty straightforward. There was a mortgage on the property and person was only collecting state pension. So (fingers crossed) straightforward enough. But if they kept all documents, that is another question.

First things first then, email to potential client and quote and hopefully engage, then get them registered for SA, then 64-8 in place. Can deal with the 20/21 SATR pretty promptly. Notify HMRC about LPC disclosure for client which I can do on their behalf at this point. Then its just a case of reporting all info and hoping HMRC and Client all agree to total tax/ penalties/ interest due.
Thanks for the help, I am feeling a bit more relaxed about this.
Crumbs, I have spent most of accounting career in practise, this has never come up once. Decide to get my practising certificate last year and boom! First complex case in less than a year.

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By Paul Crowley
05th Jun 2021 16:21

Had a potential client in this week
Got a letter from HMRC dated 11 May (arrived 18 May) with sheets enclosed asking for client to write on sheets all income and expenses, for all years to date. The notes suggested that they would inform him what expenses were allowable.
Time limit for the reply, 11 June 2021.

No mention of taking advice, the let campaign, discuss tax agent etc.
Even advised not to register for self assessment as they will decide whether he needs to register.

He had already filled them in before arriving
One section asked why he had not declared. He had already completed it stating that he knew at the beginning that rent was taxable etc

Not seen such papers before.

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By 2003bluecat
08th Jun 2021 13:29

I've done half a dozen of these now and would echo the comments above.

Get the client signed up for self-assessment and registered with a 64-8 in place as soon as possible. The notice of disclosure also needs to be a priority as the last thing you or the client wants is for the penalties to double.

I found it very useful to create a spreadsheet with a column for each tax year to work out the underpaid tax (if any). Underneath this you can then include each period of interest rates (as they have changed numerous times over the last 9 years) which will help in calculating the interest due.

Bear in mind you may find the further back you go the less tax there will be (mainly thanks to mortgage interest being fully tax deductible in the past).

With regards to charging - we always quote at what we would have charged had we done each years tax returns and advise the client that we will lower this it if the estimated time required is reduced thanks to their responsiveness to any queries (this often helps encourage even the most reluctant to chase for the necessary information themselves). We also request 50% of the fee upfront and the final 50% prior to submission (helps as most that we've done have been new clients and the last thing you want is to be working for free).

Another point to note - you will need to know historical income figures to correctly calculate the income tax rate. The LPC helpline have been reasonably helpful in this regard in my experience (at least compared to other HMRC departments).

Finally, you may encounter issues going this far back if there are any trading losses in the earlier years and the disclosure form does not allow you to explain how a profit has been made but no tax is due. HMRC sent us a letter questioning our calculations but a (slightly curt) response detailing the areas in which their forms are lacking and an explanation of how we had calculated (correctly) the figures soon got this sorted.

Good luck - it will be a good learning experience and once you've done the first one you'll have little problems going forward.

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Replying to 2003bluecat:
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By ShoulderShrug
08th Jun 2021 14:04

Thanks for the advice on how to structure each tax year. The way you quote originally how I was going to do it but decide to reduce it slightly due to my lack of experience and also to hopefully persuade the potential client to engage.

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Replying to ShoulderShrug:
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By Hugo Fair
08th Jun 2021 15:52

Small hint:
Personally rather than just "reduce it slightly due to my lack of experience", I'd quote them the 'full price' (so that they understand the actual cost) but offer them a special discount (say 'because you admire their attitude' or whatever).
That sets their expectations a little higher for next year, but in the meantime most people love being treated as special (especially if it involves a discount)!

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Replying to Hugo Fair:
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By ShoulderShrug
08th Jun 2021 16:10

That is brilliant. Definitely going to try that approach in the future.

I did send them a quote but I did not use "reduce it slightly due to my lack of experience" as I think that would send them packing :) I just maintained my professionalism and pretended I knew what I was doing.

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