Self Assessment

wildgoose1uk

I have been asked by a church I do work for to do the tax return for one of their members. Income seems fairly straightforward (2 jobs and one property rental) but she is a pensioner in the east end of London who has no clue about tax.

I will be looking at the paperwork later in the week and hopefully she will be able to give me what I need to complete the return. Apparently they have given her till the 15th to get it done without penalty.

The bigger problem is that she has had this rental property for six years and has never done a tax return. Can anyone give me an idea of how HMRC will treat this and what type of reaction I will get?

She does not have a lot of money and does not make much money out the rental so the church will be paying for the work but neither do I want to give them a large bill.

Thx in advance.

wg

jamesm96

Hi wg,

When you say that she doesn't make much money on the let, is the mortgage (assuming this is the main cost) a repayment mortgage? The biggest recurring misunderstanding I have with clients who come to me with rental income is that they don't have much surplus over and above the mortgage payments and they think that means they won't need to pay any tax.

If it is interest only and only a small profit I'd be hopeful that an understanding / reasonable officer at HMRC would be unlikely to get too heavy with late penalties... etc, though there's no guarantee.

Just remember that any tax bill really isn't your fault; you're really only the messenger.

wildgoose1uk

Hi Mike

Thanks for that. I have asked for the mortgage statements so that should make it clear.

What part of Kent are you in?

wg

clegganator

Also when writing to HMRC try and play the goodwill card. State your acting on behalf of a sweet and innocent old lady who doesn't have a clue or much money but is willing to cooperate as much as she is able. Also say she offers her thanks in advance. Try and flirt some goodwill, if possible.

wildgoose1uk

I have now received the i&e accounts for the property let for the last three years but no mention of a tax return being submitted. The let has made a loss every year so no question of any tax to pay.

They charged her £180 per year to prepare them!

jamesm96

wildgoose1uk wrote: »

I have now received the i&e accounts for the property let for the last three years but no mention of a tax return being submitted. The let has made a loss every year so no question of any tax to pay.

They charged her £180 per year to prepare them!

So... she had an accountant? Or have I misunderstood what £180 was charged for?

Just on a commercial level, if she's making a loss on the house perhaps she'd be better off if she were to sell it? If it's loss making then she's basically paying for someone else's housing costs! Or, could the problem be rectified by charging more rent / getting a better mortgage deal?

I'm in Ashford, by the way. You?

wildgoose1uk

Yes I know...... I am not quite sure what has been done in the past but last year her accountant apparently charged her £700. Initially I did not know she had used one. I wonder if last year was the first year HMRC asked her about it and all the i&e accounts were done then, otherwise I struggle to see what cost £700. To be honest I struggle anyway... just a very basic i&e account with the income of the rental and the expenses of ground rent, agent's fee etc. Maybe I undercharge but I would have charged less.

I understand charging more rent would be problematic in the area the flat is in. The mortgage interest is horrendous! She has been tied into a five year fixed rate which is shortly coming to an end.

I am just outside Maidstone so probably not much more than 30 mins from you!

jamesm96

wildgoose1uk wrote: »

Yes I know...... I am not quite sure what has been done in the past but last year her accountant apparently charged her £700. Initially I did not know she had used one. I wonder if last year was the first year HMRC asked her about it and all the i&e accounts were done then, otherwise I struggle to see what cost £700. To be honest I struggle anyway... just a very basic i&e account with the income of the rental and the expenses of ground rent, agent's fee etc. Maybe I undercharge but I would have charged less.

I understand charging more rent would be problematic in the area the flat is in. The mortgage interest is horrendous! She has been tied into a five year fixed rate which is shortly coming to an end.

I am just outside Maidstone so probably not much more than 30 mins from you!

Yeah fixed rates from three or four years ago are a real bind, given current rates. Might she be able to re-mortgage at a new, lower rate and just suffer the Early Repayment Charge?