The new late filing penalty regime for tax payers is worrying for many landlords who have not filed returns for a number of years.
The new filing penalties have scrapped the old cap on fines that meant landlords with losses or tax due of less than £100 paid nothing or a fine equal to their tax.
Now, any late return attracts a £100 fine – and the charges mount up the longer the delay.
A tax return that is three months late costs £100 plus £10 a day for up to 90 days. At six months and 12 months, add 5% of the tax due at each milestone – £300 if the 5% penalty is less.
Deliberate late filing can increase the penalties by 70% and concealment – trying to hide a tax liability – can double it.
The typical scenario for landlords is failing to make tax returns for a number of years – but they should not worry unduly about the new penalty system.
This is a failure to notify rather than a failure to submit a tax return. Penalties are still due but not late-filing penalties, so they are less strict and cheaper.
Landlords should tell the tax man they have income from property by October 5 of the year following the receipt of the first rent.
The key point here is the rules do not mention whether the landlord makes a rental profit or loss, it’s whether any income was due.
Late notifiers can still argue that coming forward and making a clean breast of their tax affairs merits a penalty discount.
Landlords who have just failed to file tax returns when asked by HM Revenue & Customs face a different penalty treatment.
Get the current year tax return filed on time – even if the figures need amending later – then work on the earlier years to clear the backlog. Pick on clearing the years where daily penalties are already being charged.
