We often get approached by individuals who have not reported all their income or gains to HMRC. In the first instance, we discuss whether there is a requirement to file and what information will be needed. It can be a scary time, especially if HMRC has issued a ‘nudge’ letter.
The next stage is to determine how many years of reporting are required and whether it falls within a ‘campaign’, such as the ‘Let Property Campaign’, or if the standard ‘digital disclosure service’ should be used.
Case Study 1:
A client contacted us to advise that she had recently lost her husband and discovered that he had not been reporting their modest rental income to HMRC. He had always looked after their finances and although they had wanted to sell the flat, following the Grenfell fire, unsafe cladding on their building had made it impossible.
As he was also unwell towards the end, paperwork got missed and it has taken nearly a year to collate all the information and liaise with HMRC, to get both her own and her late husband’s affairs brought up to date.
It’s also worth remembering that she has a continuing requirement to file tax returns, so we had to register her for self-assessment as a separate process.
Case study 2:
A non-UK domiciled individual who is living in the UK discovered that his Father had purchased a rental property in his name, some years previously, in France.
He had been in the UK at a private school until the age of 18, then travelled to France for a couple of years, before finishing his education in America. His return to the UK coincided with the start of his employment.
As a non-domiciled individual, under current legislation (due to change in April 2025), we had to review his UK tax residence status. As his school years still count towards the total number of years of residence we had to determine at what point he needed to report this income on a ‘Worldwide’ basis.
For the first few years of residence, following his return from America, he could continue to report on a ‘remittance’ basis. However, because he had not brought any of the rental profits to the UK – remember he didn’t know about the property – there wasn’t anything to report.
It has, therefore, resulted in only one year of rental income that needs to be reported in the UK, and as the self-assessment window was still open, we submitted a Tax Return instead of a disclosure.
Summary
Disclosures are an important tool to allow customers to report undeclared income. However, it is important to ensure full disclosure is made, as the penalties can be significant.
At Lambert Chapman, we can assist with making the report to HMRC and dealing with any queries raised, on your behalf. If you believe that you may have something to report, please contact our Tax Partner, Lucy Orrow.
Disclaimer
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.