HM Revenue & Customs (HMRC) has begun writing to people it believes are or have been in receipt of undisclosed rental income from abroad. The letters are also directed at those people it suspects have bought and sold property abroad and then failed to declare the profit and any resulting capital gains tax liability.
The letters started arriving a few days before Christmas and are headed Local Compliance, Individuals and Public Bodies SO560, Floor 3, Weardale House, Washington, Tyne & Wear NE37 1LW. The generic content of the letter reads as follows:
We hold a range of information about overseas property owned by UK citizens. This includes information from property letting websites. We also obtain details from governments around the world about property ownership and details of bank accounts related to those properties.
We hold information which indicates that you may currently own one or more properties overseas, or that you have done so in the past. Owning properties abroad can have an impact on your UK tax liability, particularly if the property is let or if you have disposed of it.
What you need to do now
Please complete the attached reply slip with the information requested and return it to us no later than 31 January 2014. We will review what you have told us against the information that we hold.
You may like to think about whether you have fully disclosed all your taxable income and capital gains, which may affect your UK tax liability. If you have not, you can tell us about any income or gains from any source including overseas properties in the following ways:
- by using the space provided on the reply slip
- by calling our helpline above (03000 579080)
- alternatively, HMRC has a Let Property Campaign which offers a voluntary disclosure opportunity. Details and information can be obtained by accessing our website; https://www.gov.uk/government/policies/reducing-tax-evasion-and-avoidance/supporting-pages/hmrc-campaigns or calling the campaign helpline on 03000 514479.
What happens if you do not reply
This letter is not the start of a compliance check into your tax affairs; it is your opportunity to get things right. We can help you put your tax affairs in order but, if you do not return the enclosed reply slip by 31 January 2014 we may start a check into your tax affairs. If our check then shows that additional tax is due, we will seek a settlement of unpaid liabilities, together with any interest and penalties that may be due. In some cases we may consider starting a criminal investigation.
Getting professional advice
If you have told us that you have authorised a tax adviser to act for you in relation to your tax affairs we will have sent them a copy of this letter. If you do not have a tax adviser acting for you, or you do not submit a tax return, you may wish to seek professional advice.
If you would like to discuss anything or need any help or guidance in relation to this letter please call our dedicated helpline on 03000 579080, quoting the reference OP1.
Mr K Milton
Personal and Capital Gains Tax Compliance
So far we, at Abbey Tax, have taken calls from people who have been in receipt of foreign rental income, but have not declared it because they have made a net loss. We have also spoken to people who have bought foreign properties and used them as family holiday homes, but when they have tried to sell up have been unable to do so and have ended up being reluctant landlords. Some have handled the rentals themselves, whilst others have used specialist foreign holiday websites to attract tenants.
Either way, whether a profit or loss has been made, it needs to be declared to HMRC.
The best route to make such a declaration is usually* via the HMRC Let Property Campaign. The Campaign is an opportunity for landlords letting out residential property, whether abroad or in the UK, to get their tax affairs uptodate on the most favourable terms.
In order to get the most favourable terms, the landlord must tell HMRC of their intention to make a disclosure by completing a notification form which can be accessed via this link http://abytx.co/1czErNv or by calling the helpline on 03000 514479. The full disclosure and payment then has to be made within 3 months.
If the landlord can not pay the full amount, HMRC will need to be notified before the disclosure is made via the helpline on 03000 514479.
* Disclosures can not be made via the Let Property Campaign if the landlord is already the subject of an enquiry or other compliance check. Disclosures where HMRC believes the money that is the subject of the disclosure is the proceeds of serious organised crime are not generally accepted either.
Author: Guy Smith, Senior Tax Consultant on the ReSource Tax and VAT Consultancy Team.
- Let Property Campaign: Property Abroad – the HMRC reply slip (abbeytaxblog.co.uk)