How Many Years Should I Declare On A Let Property Campaign

“Can we just declare the last six years?” This is one of the most frequently asked questions from landlords who have undeclared rental income, and the answer in almost all cases is no.

The misunderstanding usually arises because of the combination of two distinct factors: the legal time limits within which HMRC can assess tax and a separate, at their discretion HMRC practice called “voluntary restitution”. The two operate in a very different way and confusing them together can result in an incomplete disclosure.

The legal time limits: why six years is not automatic

The period for which a landlord must declare is determined by the Taxes Management Act 1970. If you have taken care to keep your tax affairs in order but have still paid too little tax, Section 34 provides HMRC with a standard time limit of four years. If tax was underpaid carelessly, Section 36 increases this period to six years, and if it was underpaid deliberately or if the landlord did not notify HMRC of the income at all, the period is extended to twenty years.

The guidance provided by HMRC in its Let Property Campaign states that if a landlord had registered for self-assessment on time and has taken reasonable care they would only need to go back four years, although if they have been careless the period in question would be six years. However, in the case of a landlord who had never registered and never informed HMRC about the income, the 20-year “failure to notify” rule applies. The shorter time periods cannot be accessed simply because six years is the figure most frequently cited.

The taxpayer has no right to reduce the length of the disclosure period and, from our experience, HMRC will only consider such a thing in the case where the taxpayer has already been sending in tax returns for those years. If HMRC believes that you registered for self-assessment on time and did submit your tax returns but still underpaid because of carelessness, or just because you did not take sufficient care to pay the correct amount of tax, they will ask you to declare only for the last 4 or 6 years. This option is not something that you can select yourself.

If you have never previously registered for self-assessment, you will be covered by the rule concerning a failure to notify over a period of 20 years and HMRC will require you to declare all the income, going all the way back to the date on which you first started receiving it. In fact, the guidance from HMRC says that you should ‘include all the income which you have not told HMRC about previously in your disclosure’.

Our experience with HMRC

Over the years we have carried out a large number of Let Property Campaign disclosures and have achieved a 100% success rate. HMRC has asked clients to state only the figures for the last 4 or 6 years, in just one or two instances. This is the exception, not the rule.

• Determine which of the time limits applies first; the duration of the disclosure—whether it’s 4, 6, or 20 years—depends on your filing record and conduct pursuant to sections 34 and 36 of the TMA 1970, not on a general presumption.
• Do not prepare a disclosure based on voluntary restitution; if you assume that HMRC will allow it, you risk submitting an incomplete disclosure and incurring higher penalties.
• From the very beginning, you should provide a complete account. Since HMRC only rarely grant reduced periods, the most advisable course of action is to make a full disclosure for the entire period required by law. HMRC will let you know if you do in fact fall within the time limits that allow you to declare only for the last 4 or 6 years.

The safest approach is to make a full and accurate disclosure to HMRC.

Thandi Nicholls Ltd
Creative Industries Centre
Glaisher Drive
Wolverhampton
West Midlands
WV10 9TG