The disclosure period for landlords varies based on multiple factors. Our expert team can offer personalized advice tailored to your situation. It’s essential to consider the behaviour that leads to tax irregularities. In addition, it’s essential to consider whether you were registered for Self-Assessment during the relevant tax years. Legislative time limits govern HMRC’s authority to assess taxes. Your disclosure should encompass all tax liabilities that fall within HMRC’s collection timeframe (as defined by law). This timeframe ranges from as few as 4 tax years to as many as 20 years. If an LPC disclosure doesn’t cover all assessable tax liabilities, HMRC might initiate an investigation to recover additional taxes and impose higher penalties.

Various sources of rental property data are collected by HMRC, including letting agents, government agencies, local councils, banks, and even anonymous tips. This data is used to identify unpaid taxes. If HMRC suspects underreported rental income, you might receive a letter asking for a disclosure under the LPC.

Do not ignore the letter. HMRC usually sends ‘nudge letters’ when they genuinely suspect tax irregularities. Even if you believe you’ve fulfilled your tax obligations, it’s wise to consult a specialized tax advisor to review your situation.

Lanop Business and Tax Advisors offers a comprehensive rental income review service. This helps us guide clients on the best response to HMRC’s ‘nudge letter’ and reduces the risk of unnecessary taxes and penalties.

Being proactive and Addressing Deliberate Behaviour

If you suspect that you’ve underdeclared rental profits to HMRC, it’s crucial to take proactive steps and review your situation promptly. Landlords who identify errors can voluntarily register for a disclosure under the LPC. By doing so and making an unprompted disclosure, you will receive a significantly lower penalty as compared to waiting for HMRC to initiate contact.

In cases where you knowingly chose not to declare rental income at the appropriate time or became aware of the carelessness but didn’t take corrective action, HMRC’s Code of Practice 9 (COP9) Contractual Disclosure Facility is the recommended approach for comprehensive protection through disclosure. If this applies to your circumstances, we strongly recommend seeking expert advice before engaging with HMRC.

The Penalties for undisclosed rental income range from mild to severe based on the situation

1.   It varies from 0% to 30%. If you failed to register for self-assessment but had no intent to hide rental income, the penalty could be around 10%.
2.   When you are found to be originally misleading or hiding your income from HMRC to avoid taxes, penalties can go up to 35%. Accurate reporting and transparency with HMRC are crucial to avoid severe penalties.

LPC Disclosure Process for Rental Income Whether you receive an HMRC ‘nudge letter’ or voluntarily step forward, the LPC disclosure process follows these steps:

1.   Registration: Notify HMRC that you intend to make a voluntary disclosure. Within 15 days, HMRC will acknowledge and provide a disclosure reference number (DRN).
2.   Disclosure: Submit the Let Property Campaign disclosure within 90 days of HMRC confirming your registration. This disclosure should include:
    1.   Unreported rental income
   2.  Tax, interest, and penalty obligations arising from this income

3.   Payment: Make payment upon submission unless a payment arrangement is agreed upon with HMRC.

The award-winning tax advisory team at Lanop Business and Tax Advisors can guide you through the disclosure process of the Let Property Campaign. Our experts can provide customized advice tailored to your unique situation, ensuring a smooth experience. Our fees will correspond to the number of tax years requiring disclosure. By choosing Lanop Business and Tax Advisors for specialised guidance, we will:

1.  Conduct a full review of your tax situation, identify any necessary disclosures, and offer an initial assessment of your exposure extent.
2. When appropriate, facilitate your registration for the LPC process.
3. Prepare and submit an LPC disclosure on your behalf, ensuring you avoid unnecessary tax, interest, or penalties.
4. If suitable, compose a letter of representation clarifying your position to HMRC, expediting your disclosure’s resolution.
5. Negotiate an affordable time-to-pay arrangement according to your financial situation and personal needs.