‘Closing the tax gap’, or the difference between the tax actually collected and that which HMRC thinks should be collected, represents an important challenge for the Department.
The tax gap reflects tax lost for a variety of reasons. These include criminal attacks on the tax system, non-payment, the deliberate (and illegal) concealment of income or assets, the use of schemes designed to avoid payment of tax, error and where taxpayers simply don’t take enough care with their tax returns. Losses can also arise due to different interpretations of the tax consequences of complex transactions.
HMRC campaigns are one way that it seeks to address the issue. These campaigns offer people a chance to get their tax affairs in order on the best possible terms. They provide tools and information to help people do this; to then keep their affairs in order; and to help stop things going wrong in the first place. Where people choose not to take the opportunity to set the record straight, HMRC use the information gathered before and during the campaign to conduct follow-up work. This can include investigations and prosecutions. There are a number of campaigns running at any one time and details can be found on HMRC’s website at;
A current campaign that could impact on many ordinary taxpayers is the Let Property Campaign. This is because it targets the residential property letting market. In recent times it has become increasingly common for people to own more than one property. Even if they have not deliberately set out to purchase a property as an investment, they may have inherited their family home and decided to rent it out rather than sell it. Many people are unaware that the rent they then receive is taxable and that they need to complete a Self Assessment Tax Return to declare it to HMRC.
Beware even if you rent out a room in your own home. You can still be caught out, but only if the rent you receive is more than the ‘rent a room allowance’ of £4,250 a year (or £2,125 a year if you own the property jointly with another person).
HMRC imposes penalties on taxpayers for not notifying them of the need to file a tax return, for not completing a tax return (where one is required) and for not paying the tax due on time.
- you need to tell HMRC within 6 months of the end of the tax year in question if you think you need to complete a tax return
- you need to complete your return by 31st October (paper) or 31st January(online) after the end of the tax year
- you need to pay the tax due by 31st January after the end of the tax year
Put simply, it means that if you received income from a let property in the 2012/13 tax year you have now failed on all three counts! HMRC looks at taxpayer behaviour when deciding what action to take, so your best course of action at this point is to call the Let Property Campaign Hotline between 9 am and 5 pm Monday to Friday on 03000 514 479. You will be given three months to calculate and pay what you owe.
If you have started to receive letting income in the 2013/14 tax year and you haven’t told HMRC yet, call HMRC before 6th October 2014 on 0300 200 3310 where you can notify and register for Self Assessment.
This article is by Tax Help for Older People (operated by registered charity no 1102276), offering free tax advice to older people on lower incomes. Our Helpline number is 0845 601 3321 or geographical 01308 488066.