Advice in making a disclosure to HMRC under the Let Property Campaign

A taxpayer approached SME Strategies for looking for advice about the Let Property Campaign advice having realised that he had rental income that had not been disclosed to HMRC. The client had heard of the Let Property Campaign (LPC) and looked into it. The taxpayer was though unsure how to calculate the additional tax due to HMRC using his marginal tax rate. Nor did he know how to assess his penalties, nor calculate the interest. He was also unsure of the legitimate expenses he could charge.

On the face of it, HMRC tries to make the Let Property Campaign look straightforward. However, the taxpayer soon realised it was far from straightforward if he was to settle his tax liabilities at the lowest permitted level and to do so without anxiety and undue hassle.

He had seen an article that we at SME Strategies had written on the Let Property Campaign and approached us for advice. After a conversation, we were appointed to be his tax advisers and deal with the disclosure.

A review by us of the client’s previously submitted self-assessment tax return showed that some tax-deductible expenditure had not been claimed. The Let Property Campaign allows for a reworking of a previously submitted self-assessment return if it is to a taxpayer’s benefit. Also, the client’s draft rental income did not include all allowable expenditure. HMRC’s self-assessed culpability matrix for penalties is complex to negotiate. Knowledge of HMRC’s approach to penalties is needed in working out a penalty that is acceptable to them.

HMRC’s online disclosure portal has known weaknesses in it which mean that legitimate, and correctly computed LPC disclosures are sometimes (or even often) rejected. HMRC then incorrectly require a whole new manual disclosure to be submitted. In this case, HMRC rejected the disclosure and claimed the interest was incorrectly calculated despite it being calculated on HMRC’s own software. HMRC asked for a brand-new disclosure. The intimidating wording of HMRC’s rejection letters can cause honest taxpayers understandable anxiety.

As seasoned and experienced accountants at SME Strategies, we were able professionally but firmly to refute HMRC’s rejection. HMRC then accepted the original disclosure unamended by which we stood.

By using a specialist tax adviser, all HMRC correspondence goes to the adviser. The taxpayer can therefore be unaware of the heavy-handed approach taken by HMRC in their correspondence and is thus spared the anxiety of receiving such letters – as was the case in this disclosure. At SME Strategies we seek to take the strain on behalf of our clients.

In the spirit of cooperation, we have written, and also spoken, to HMRC about the flaws in their online LPC disclosure (see this link also) but so far to no avail. As is often the case, it is so hard for organisations to see through the other end of the telescope at the client’s perspective. The local HMRC executive at the end of the phone can be sympathetic but making changes to HMRC’s reporting system sometimes seems a near impossible task.

Client testimonial

“I realised I had a few years of undeclared rental income and came across David and SME Strategies while looking for information on making unprompted disclosures to HMRC via the Let Property Campaign (LPC).

David was quick to understand the situation fully, which was non-standard in certain aspects, and within a couple of days, he was able to submit a disclosure to HMRC for me. Throughout the process, David was very responsive and demonstrated a lot of professionalism and expertise. He was also patient in explaining to me the process involved and the reasoning behind each of the amounts which went into the disclosure. David was able to hit the right balance between proposing as low a penalty as possible and at the same time minimizing questions from HMRC. The outcome was that there was only one question from HMRC (which David said was a standard question) to which David swiftly responded and HMRC accepted our offer with no further questions.

While I work in the financial industry myself, the process would still have been quite stressful and the final payment to HMRC would have been higher had I worked out my own disclosure without David’s help.

I highly recommend David if you need to make disclosures to HMRC!”

DC, London

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