Talking to someone at HMRC who knows what they are doing is great! It can be difficult to speak to the right person, but when you do it is worth writing about.
A new client referred to me nearly 2 years ago submitted his own Let Property Disclosure. He held a rental property in joint names with his wife and had always reported the profit on her tax return on the basis that they were both higher rate taxpayers.
HMRC informed the individual to make a disclosure under the Let Property Campaign. He did so, reporting his 50% share of the profit going back to 2011/12, plus interest and penalties of course. However, during the course of the conversation HMRC informed him that they ‘would make an adjustment to his wife’s PAYE code to repay the overpaid tax’. Clearly incorrect!
He paid his share of the tax due under the disclosure, and then heard nothing about the refund due to his wife. He then engaged me to review the position.
I found a number of errors in his disclosure, and the way in which he had reported the profit to HMRC. These were quickly corrected, resulting in a refund. However, it has proved impossible to get the refund due back to his wife as we were out of time to take any action on her tax affairs. We managed to make overpayment relief claims for the later years. The Let Property Team would not speak to me. The self-assessment team said we were out of time to make overpayment relief claims for the earlier years. We thought all was lost!
One final letter to HMRC about an error in the original calculation on the Let Property disclosure resulted in a phone call from HMRC. I raised the issue above, and the individual I spoke to could see the issue. He also explained that the aim of the Let Property Campaign was primarily to ensure future tax compliance.
He could clearly see the issue here, and said that if HMRC did not refund the earlier years payment to my client, my client may not wish to ensure his compliance is kept up to date in the future. He went away to discuss with his team what could be done.
The next day I got a call at the time arranged from the individual at HMRC, and he set out what we needed to do in order to obtain the refund due to my client. He had calculated that there had not been a loss of tax to HMRC as a result of the way in which the client had previously reported the rental profit. The refund amounted to a five figure sum, so you can imagine the relief from my client when I informed him after just under 2 years of trying, we had managed to obtain the refund due and his tax affairs will shortly be completely up to date.
We will be looking after this individuals tax affairs going forward, so there should be no risk of him making a mistake again.
I suppose the moral of the story above is to get professional advice before making any kind of disclosure to HMRC.
I have been approached by a number of individuals who have received letters from HMRC recently about offshore income and gains, and I am sure there are hundreds, if not thousands of these letters going out to unrepresented taxpayers. If the correct response is not made to these letters, those individuals could find themselves in a very difficult position in the future.