Incorporate The Rental Losses
If you find out that after deducting allowable expenses from the rental income, you have made a loss, you don’t have to include that year in your disclosure. This loss however can be carried forward to reduce the tax liability on the rental profits following years.
The rental loss can be net off against future rental profits only and cannot be claimed to reduce the liability on other types of income.
Calculating and claiming rental losses can be complex. Care Accountancy can provide you with accurate calculations of rental income or losses and in case of a loss, we can claim this to reduce your future tax liability, efficiently.
How To Notify HMRC And Make A Disclosure?
You must tell HMRC that you will be making a disclosure to take part in the Let Property campaign. You need to do this as soon as you find out that you owe tax on your letting income. You are not needed to provide any details of the undisclosed income at this stage.
Individuals and companies can notify the HMRC by submitting the Digital Disclosure Service (DDS) form. The HMRC will then issue you your Disclosure Reference Number (DRN) and also a Payment Reference Number (PRN) to use when paying the amount you owe.
If you are an agent – You will use the Agent DDS to make a disclosure on behalf of your client. You will then receive the DRN and PRN.
You cannot make a disclosure for more than one person. If a husband and wife both have an undisclosed income they must disclose it separately showing the income they want to disclose.
As soon as you receive the DRN you must disclose your income within 90 days of your notification acknowledgment.
You can make a disclosure
- For your own tax affairs
- On behalf of your client (if you are an agent)
At this point, you must pay what you owe. You have to ensure that the HMRC receives your disclosure and payment by the due date stated on the notification acknowledgment. In case you think you would not be able to pay by the deadline, you should arrange certain payment agreements with the HMRC by the due date.
How Many Years To Include?
The number of years to include in the disclosure depends upon why things went wrong in the first place.
If you are signing up for the Let Property Campaign, you will need to consider why you have not disclosed all of your income to the HMRC and paid the right amount of tax.
How much you will be asked to pay and for what a number of years depends on:
- Whether took reasonable care to have your tax affairs or not
- If you deliberately misled HMRC about your letting income and paid too little tax
- Didn’t tell HMRC about your income at all
The consequences of deliberately omitted income from your tax return can be severe.
We will discuss the background of your scenario with you to assess how many years you have to include in your disclosure and provide you with satisfactory results in the end.
HMRC charges interest for the number of days you have not paid the tax liability after the due date. You can use the HMRC’s calculator to calculate the exact amount of interest you will have to pay.