If you’ve received an HMRC nudge letter, or even if you haven’t and wish to correct historic irregularities in reporting your property income, we recommend using the Let Property Campaign (LPC) to put things right. Here’s what you need to know about the LPC and how we can help.

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The Let Property Campaign (LPC) is an HMRC disclosure initiative, designed to help landlords regularise any historic UK tax irregularities associated with their rental profits. The LPC allows landlords to make a full disclosure of any unpaid tax, under settlement terms that are often more preferable than if the irregularities were discovered as part of an HMRC enquiry. This is because where an LPC disclosure is accurate and complete, HMRC will often only charge the minimum financial penalty.

Who can use the LPC?

A wide variety of residential property landlords are eligible to make a disclosure under the LPC, such as:

• Landlords who let out one or more UK properties

• Landlords who live abroad and let out property in the UK

• Landlords who live in the UK and let out property abroad

• Landlords who let out a room in their main home

• Landlords who specialise in property lets for students

• Landlords who let out holiday homes

How far back do landlords need to disclose?

The number of assessable tax years will depend on several factors. While Buzzacott’s team of experts will be able to provide bespoke advice that is specific to your case, it will always be necessary to consider the behaviour that led to the irregularities in your tax affairs and whether you were registered for Self-Assessment in the relevant tax year. HMRC’s powers to raise assessments are restricted by the time limits set out in legislation. It’s vital that your disclosure presents all of the tax liabilities that HMRC remains in time to collect (as set by statute). This could be as many as 20 years or as few as four tax years. Where an LPC disclosure doesn’t present all the assessable tax liabilities, HMRC may well open an investigation and seek to recover additional tax and higher penalties.

Can HMRC find out about rental income?

HMRC receives data relating to rental properties from a variety of different sources. These include letting agents, government agencies, local councils, banks and even anonymous tip-offs from the general public. HMRC uses this information to identify if you have an unpaid tax liability. HMRC may then write to you, advising that it has reason to suspect rental income may have been under-declared, inviting you to make a disclosure under the LPC.

What should you do if you receive a nudge letter from HMRC?

Do not ignore the letter. While sometimes HMRC’s suspicions prove unfounded, it doesn’t issue these ‘nudge letters’ unless it genuinely suspects that there are irregularities in your UK tax affairs. Even if you’re confident that you have fully complied with your tax obligations, we strongly suggest that you consult a tax investigation specialist to help you review your position. At Buzzacott, we operate a comprehensive rental income review service. This enables us to advise our clients on the most appropriate response to HMRC’s ‘nudge letter’ and diminishes the risk of exposure to unnecessary tax and penalties.

Being proactive

If you have concerns regarding underdeclared rental profits to HMRC, we strongly advise that you fully review your position immediately. Landlords who have made errors can voluntarily register to make a disclosure under the LPC. By coming forward and making an unprompted disclosure, you’ll receive a significantly lower penalty than if HMRC were to write to you first.

Deliberate behaviour

If you knew at the time you should have declared rental income but consciously chose not to or if you subsequently discovered you should have declared rental income but chose not to do anything to correct matters, HMRC’s Code of Practice 9 (COP9) Contractual Disclosure Facility is the most appropriate course of action to disclose to ensure you’re fully protected. If this is something that applies to your circumstances, we strongly recommend you seek expert advice before contacting HMRC.

Penalties and how to reduce them

In all cases where irregularities are identified, HMRC is obliged to consider charging financial penalties. When contemplating penalties, HMRC will consider the underlying behaviour, whether you came forward voluntarily, and the quality of your eventual disclosure. The penalties are charged as a percentage of the original understatement of tax. Buzzacott has a long-established and proven track record of ensuring that our clients receive the minimum financial penalty allowed by law. For many clients, this means that they don’t pay a penalty at all.

What is the LPC disclosure process?

Irrespective of whether HMRC issue you with a ‘nudge letter’ or you elect to come forward voluntarily, the LPC disclosure process is as follows:

1. Registration – This notifies HMRC of your intention to make a voluntary disclosure. Within 15 days, HMRC will confirm receipt and issue a disclosure reference number (DRN).

2. Disclosure – The LPC disclosure must be submitted within 90 days of HMRC confirming registration.

The disclosure must include:

• The unreported rental income

• The arising tax, interest and penalty liabilities

3. Payment – This must be made at the time of submission unless a time to pay arrangement has been agreed with HMRC.

How we can help

Buzzacott’s award-winning Tax Investigations and Dispute Resolution team can guide you through the Let Property Campaign disclosure process and provide you with bespoke advice, tailored to your specific requirements. Our fees will be proportionate to the number of tax years that need to be disclosed. Should you choose to get specialist advice from Buzzacott, we will:

• Conduct a full review of your tax affairs, identifying any issues that need to be disclosed, providing you with an initial view as to the extent of your exposure

• Where appropriate, register you for the Let Property Campaign disclosure process

• Prepare and submit a Let Property Campaign disclosure that ensures you don’t pay any unnecessary tax, interest or penalties

• Where appropriate, deliver a letter of representations to explain your position to HMRC to bring your disclosure to a swift conclusion

• If needed, negotiate a time to pay arrangement that is affordable according to your needs and personal circumstances