{"id":4417,"date":"2020-10-13T12:10:18","date_gmt":"2020-10-13T12:10:18","guid":{"rendered":"https:\/\/www.georgehay.co.uk\/blogs\/?p=4417"},"modified":"2023-11-17T16:44:17","modified_gmt":"2023-11-17T16:44:17","slug":"beware-undisclosed-property-income","status":"publish","type":"post","link":"https:\/\/www.georgehay.co.uk\/blogs\/2020\/10\/beware-undisclosed-property-income\/","title":{"rendered":"Beware undisclosed property income!"},"content":{"rendered":"

Undisclosed property income has long been on HMRC\u2019s radar and its data sharing system has made it easier to pursue those taxpayers at fault.<\/p>\n

Last month, Reuters<\/a> reported on an investigation into the UK arm of Airbnb, conducted by HMRC, during which Airbnb stated that it would share details of the rental income earned by its hosts in 2017\/18 and 2018\/19 with the tax authority.<\/p>\n

Consequently, those who have earned rental income from letting property out via Airbnb and who have not disclosed this correctly will undoubtedly be targets for tax enquiries.<\/p>\n

The data being shared also comes under the \u2018discovery\u2019 rules. HMRC can, therefore, delve into data spanning the last 20 years and it will likely take advantage of this freedom.<\/p>\n

Declaring undisclosed property income to HMRC<\/h5>\n

What you must declare will depend upon your set-up; i.e. are you letting a room within your principal residence or a second or third property in its entirety?<\/p>\n

If the former, the \u2018rent-a-room\u2019 relief allowance means any income up to \u00a37,500 will not generate a tax obligation.<\/p>\n

Where the latter is true, however, only \u00a31,000 can be earned before you generate a tax liability. This \u00a31,000 limit is also often referred to as the annual trading allowance.<\/p>\n

Any income not covered by either of the aforementioned allowances should be declared. Where this has not already been done in a timely manner, landlords should make every effort to rectify their tax affairs.<\/p>\n

If you are already submitting a Self-Assessment Tax Return, we recommend disclosing this income, even where no tax is due. Doing so will reduce mismatches in data and mitigate the risk of an enquiry.<\/p>\n

Your circumstances will also dictate how you should make your declaration to HMRC. Where undisclosed property income was earned in the tax year 2018\/19, taxpayers can amend the respective tax return until 31 January 2021.<\/p>\n

Where the issues arise in earlier years, taxpayers may want to consider making a disclosure under HMRCs \u2018Let Property Campaign<\/a>\u2019 which is available to individuals letting out UK residential property.<\/p>\n

Penalties and enforcement action can be minimised if you are voluntarily upfront with HMRC.<\/p>\n

Does your property qualify as a Furnished Holiday Let (FHL)?<\/h5>\n

If your property qualifies as a Furnished Holiday Let (FHL), it will benefit from certain other tax advantages.<\/p>\n

For example, furnishing costs can be deducted from your pre-tax profits. Furthermore, when selling, you can claim for certain Capital Gains Tax (CGT) reliefs.<\/p>\n

You must meet the following criteria, for your property to be deemed an FHL:<\/p>\n