I have received an enquiry from a potential client, who says that for the last 3 years he has owned a rental property, but hasn't declared this in any of his tax returns.
What I would like to know is, what penalties and fines would he receive for not declaring his rental income and also what type of docs do I need to ask him to get together, am I right that he can claim for repairs to the rental property?
All help so much appreciated as usual!
This is my first client who owns rental property!.
-- Edited by lor on Tuesday 11th of May 2010 07:08:25 PM
The first thing I would like to know is what has prompted the client to decare now. Has he already been approached by hmrc or is this a voluntary disclosure? If the the former I believe penalties could be 100% of any unpaid tax (though this can be mitigated on a number of grounds), if the latter he may be subject to just the unpaid tax and interest.
From your post it sounds as if he already has submitted tax returns, in which case I would write to hmrc with a spreadsheet summary of income and expenditure for each year.
Don't forget that property income is calculated within the fiscal year. the main expense to claim is mortgage interest (not the capital repayment) and prior to interest rates falling, this often wiped out any income received. Also claim ground rents if applicable, agents fees,water rates, council tax etc if paid by landlord, insurance, legals, repairs and 10% wear and tear.
For fuller information you may want copies of completion statements etc in case you ever do work regarding cgt if any properties are sold.
I know places in Thailand that he could disappear, live comfortably and never be found!!!
Sounds as though there's a couple of false declarations thrown into the equation here.
It does seem strange that your client will have been missing out on what he is able to claim such as loan interest. Normally lenders chase up on this sort of thing to ensure that one is treating the buy to let as a business.
Is this just the guys main property that he's let out without telling his lender? If so, maybe he could put it down as rent a room? (even though the entire house was being rented).
If this is actually genuine avoidance, after recalculating everything note that the revenue may still fine your client a percentage of the difference. So, if they owe your client (for example) £1000 they might fine him £700 for making an incorrect declaration on his tax return.
Remember that case a couple of weeks back where a builder made a genuine mistake and put in a claim for £3000 but the revenue calculated that they only actually owed him £1000 so charged £1400 fine as 70% of the incorrectly claimed amount leaving the guy with a bill for £400 rather than a £1000 refund!
Fingers crossed that as he's coming clean on his own they may be lenient... I wouldn't put a bet on it though in the current grab every penny you can climate.
Good luck Loraine, you really get them don't you!
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I think I could do with a hideaway in Thailand! How much would you need to earn (sterling) to live really well in thailand? I'm thinking I could do some on-line work and spend the rest of my day sipping papaya milkshakes and dangling my feet in the water....obviously these thoughts are hastened by the nightmare that is our new chancellor...last time I vote lib dem!
Lorraine, don't forget if there is no tax liability, there will be no fine. However this rule is changing (or has it already changed?)
the exchange rates not brilliant at the moment but you can still live very comfortably in a very up market hotel (better than anything that you will find around knightsbridge) for around £700 per month.
I'm suspecting that now we've got a better government sterling will strengthen against all major currencies. I know that a lot of markets were eager to buy into our debts but they were holding off in case the Muppets got another term.
Just hope that Alastair Darling in a last ditch attempt to sink the country totally didn't sign away too much more of our money to prop up the Euro in this weekends bailout... Why should we pay to prop up a currency that we want no part of! Thank goodness the libs didn't get in as they actually want us to adopt the Euro!... Personally I would rather adopt the US Dollar... Or even barter chickens than adopt the Euro.
Not sure of the wisdom of putting Vince Cable in charge of banking but I do think that Nick Clegg will bring balance to the cabinet as Deputy PM.
Talk in a bit
Tory Boy!
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Hi Tory boy...you really should stop reading the daily Mail and subscribe to the Guardian! I think 'Just call me Dave' has payed a blinder and pandered to Mr Cleggs vanity by giving him the powerless role of Deputy PM. He may have a bit of authority over the minister for Scotland (that was a gift, who else would he have given that job to?) but Ithink it is otherwise a toothless position.
I hear on the grapevine that Zac Goldsmith is being made 'minister for toffs'!
Fear not, I grew out of the Mail a while back. I'm a Telegraph reader (same idea's bigger words).
The neatest trick that's happened this week seems to have been the libs getting Brown to stand down on the suggestion that he was all that was standing in the way of a lib-lab pact and then going with the Tory's!
Apparently whilst the libs negotiating team was talking to their labour equivalents Clegg was chatting face to face with our new glorious leader.
Don't you just love a bit of Machiavellian intrigue.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I think it would have been an unmitigated disaster had there been a lib-lab pact/rainbow alliance. I think Labour will come back all the stronger now and pick up a good proportion of the Lib Dem voters too. I can't help but think if William Hague had been Tory leader, your guys would have had a majority and not need to go down this road at all.
