HM Revenue & Customs (HMRC) has announced a new tax catch-up and advice "campaign" that focuses on persons letting residential property. HMRC claims to offer more favourable terms to those who come forwards during the campaign to settle outstanding taxes from earlier years.

There are several points of note:

• HMRC apparently estimates that there may be as many as 1.5 million 'residential'
  landlords who are alleged to be underpaying as much as £500million in tax every
  year
• This campaign will last much longer than previous campaigns - HMRC says that it will
  be open for "at least" 18 months
• However, HMRC also says that, from next year, they will start to contact landlords and
  those whom they contact will no longer be able to benefit from the campaign. So
  the eligible period of the campaign may be rather shorter for some, than for
  others
• HMRC also says that, unusually, the opportunity to come forwards will last throughout the
  campaign. Normally, campaigns are split in two: a period where the taxpayer
  notifies HMRC that he or she intends to make a disclosure, and then a
  subsequent period in which the taxpayer must make full disclosure and, broadly,
  settle up.

It is, however, important to get proper advice regarding taxation of income from residential letting. 
Marian Wilson, HMRC's Head of Campaigns, stated: "All rent from letting out a residential property or
holiday home has to be declared for Income Tax purposes".  HMRC requires you to tell it if you start to let out any property.  A self-assessment return has to be completed unless the income is less than £2,500 per year but if you don’t reach this limit you must still inform HMRC by completing form P810.  However, if you are renting out a room in a your only (or main) home then you can take advantage of the Rent a Room scheme and do not need to report the income on your tax return – the exemption is effectively automatic until the threshold of £4,250 per year is breached.

HMRC is keen to raise the profile of its digital intelligence system, “Connect”, which it uses to suggest possible suspects and is reported to be one of the biggest databases in Europe.  HMRC
has long had access to data on landlords from councils and housing associations and has for some time been approaching estate and letting agents to obtain details of landlords on their books, and procuring information from Internet portals such as “Rightmove”.

If you are letting out property and need advice regarding your tax return or accounts then call Katy at Pemberley Accounting Services today on 078 105 18812 for your free initial consultation.