Accountants in the house - Property related

Bald-Eagle22

Bald-Eagle22

Bald-Eagle22

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Guys , looks like I have been a naughty boy and will have to come clean with the revenue.

I purchased a flat in December 2006 and after having a big split with the ex I never moved into it . I have rented it out since January 2007 without any breaks , I have had three different tenants in it with no issues at all .

The amount I paid for the property and the amount of mortgage interest payments and management fees are not covered by the rental income so I have been running the hole thing at a loss .

Now I will plead ignorance ( not a defence I know ) but it has been brought to my attention that I will need to submit a tax return to the revenue for this and I have not done so .

It will be easy enough to complete some books as I have run this from a separate bank account and have all the paperwork needed as well to support my claim of running this at a loss. Oh and I have written permission from the Building society to do so.

Now I need to see an accountant to get this sorted out - what can it expect the revenue to say to me for not submitting a tax return for gulp 7 years ? Although there will be no tax due will they fine me ?
 
http://www.hmrc.gov.uk/manuals/salfmanual/salf208a.htm


Online return - more than 12 months late

The filing date for Jonathan’s 2012-13 return is 31 January 2014. Jonathan files his return on 3 February 2015. His return shows a liability of £3,000. Jonathan is liable to the following penalties:

the initial fixed penalty of £100 on 1 February 2014
daily penalties of £900 (90 days at £10 for each day from 1 May to 29 July 2014)
a tax-geared penalty of £300 on 1 August 2014 (£300 is greater than 5% of £3,000)
a tax-geared penalty of £300 on 1 February 2015 (£300 is greater than 5% of £3,000)
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It changed in 2010 so that's only relevant for those subsequent years, in theory £1000 for every missed year since 2010 + what ever from 2006 - 2010!

I would prepare some lube to be honest
 
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You still need to file a SE though regardless, it might be even more compounded if the mortgage inst on a buy to let.
 
A friend just had something similar and I believe he just had the £100 fine as no tax was due.

Also

However if you've been running at a loss get ready for some tax back as you have over-declared your income.

So things may not actually be as bad as you think.
 
mattyg said:
What has a loan with a bank got to do with HMRC
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because you can only offset the interest from the mortgage against the tax payable and if I am honest I don't know how that would be dealt with on a non commercial mortgage.

I cant see though how you cant have made a profit from it as you can only offset the interest expense from the mortgage, not the whole lot, its not as simple as saying I received £700 pcm but paid £800 to the mortgage, you only get relief from the interest part that makes up a part of that £800.

you can add other expenses in though (ive nicked this from elsewhere, its not my own)

interest on property loans

letting agents’ fees

legal fees for lets of a year or less, or for renewing a lease for less than 50 years

accountants’ fees

buildings and contents insurance

maintenance and repairs to the property (but not improvements)

utility bills, like gas, water and electricity

rent, ground rent, service charges

council tax

services you pay for, like cleaning or gardening

other direct costs of letting the property, like phone calls, stationery and advertising
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But you are going to need some level of paperwork to prove these expenses were greater than the income.
 
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Would it be handled the same way as someone Self employed offsets the Interest on say a car loan thats only used for business?

P.s. just re-read my other post and I'm glad you didn't take it as the way i somehow made it sound. It was a genuine question
 
Here's the kicker, they changed the rules for late filing penalties. Before the YE 2013, if you filed a tax return late and it was null, they generally refunded the penalties. Now if you file late you have to pay the £100 fine. You can appeal... but they probably won't be very lenient seen as you have made a loss and will be due tax back if you're paying tax on your employment income.

Best bet is to give them a call, explain the situation and they will get you registered for self assessment. Fill out the tax returns for the applicable years and file an appeal for the fines.

For calculating the rental income (or in this case a loss), it is the rental income less mortgage interest (not capital element), agents fees, council tax, insurance, and most other bills you pay on behalf of the tenant. The list above is fairly extensive. If it was rented fully furnished you can also claim a wear and tear allowance of 10% rental pa.
 
mattyg said:
Would it be handled the same way as someone Self employed offsets the Interest on say a car loan thats only used for business?

P.s. just re-read my other post and I'm glad you didn't take it as the way i somehow made it sound. It was a genuine question
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I don't know tbh mate, my knowledge is based on being self employed for 12 months and then a director paying Corp Tax since. I get the basics but use an accountant as its a minefield I CBA to deal with myself :P I know that when cars were discussed at Plan A we decided it wasn't worth the hassle!
 
Kemik said:
Here's the kicker, they changed the rules for late filing penalties. Before the YE 2013, if you filed a tax return late and it was null, they generally refunded the penalties. Now if you file late you have to pay the £100 fine. You can appeal... but they probably won't be very lenient seen as you have made a loss and will be due tax back if you're paying tax on your employment income.

Best bet is to give them a call, explain the situation and they will get you registered for self assessment. Fill out the tax returns for the applicable years and file an appeal for the fines.

For calculating the rental income (or in this case a loss), it is the rental income less mortgage interest (not capital element), agents fees, council tax, insurance, and most other bills you pay on behalf of the tenant. The list above is fairly extensive. If it was rented fully furnished you can also claim a wear and tear allowance of 10% rental pa.
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Not all bad then. If he's owed £1000 for overpaid tax he's still up £900. Not bad for being legit
 
LOAM said:
I don't know tbh mate, my knowledge is based on being self employed for 12 months and then a director paying Corp Tax since. I get the basics but use an accountant as its a minefield I CBA to deal with myself :P I know that when cars were discussed at Plan A we decided it wasn't worth the hassle!
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Ive been self employed for 12 yrs and a director for the last 4.

I pay a guy who has a qualification and sits behind a desk in an office to sort this stuff out. Each year he saves me more than he charges. Seems a no brainer:D
 
The issue is though is that its an instant £100 fine followed by £10 per day for a maximum of 90days (£900) and that's per year missed.
 
mattyg said:
I pay a guy who has a qualification and sits behind a desk in an office to sort this stuff out. Each year he saves me more than he charges. Seems a no brainer:D
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Same here, I take an mild interest but then the dancing monkeys descend
 
mattyg said:
A friend just had something similar and I believe he just had the £100 fine as no tax was due.

Also

However if you've been running at a loss get ready for some tax back as you have over-declared your income.

So things may not actually be as bad as you think.
Click to expand...

You cant offset rental losses against other income so he wont get any tax back. The losses have to be carried forward.
 
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