Let Property Campaign - Disclosure

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    Let Property Campaign - Disclosure

    I am currently disclosing income from property for the last 10 years. I am self employed. I jointly owned property with my wife, who has died of cancer 2 months ago. We were seperated for the last 10 years - all the time we owned this joint property. All the income from it went to me to pay for mortgage from my account only, and profit (however small), went to me. My self employed income has been small and not even passed the personal allowance, so I have not had to pay tax because of low income for 10 years . . . . maybe only 1 or 2 years of it. The declared income would cause me to pay, including fines, around £5000 on my initial calculations if I allocated all the income to myself. My wife worked for a few years, but most of the 10 years was on benefits for job seekers, then sickness, then DLR at the end (due to cancer illness for years) and had housng allowance for where she lived in rented accommodation. She had no money in her estate on death. House was joint and passed to me by intestacy. My question is, as I am declaring all the income to make it all above board and straight with HMRC, if I allocated 50% each of the income, I would therefore pay no tax, or very little, as my business income was so small. My wife's 50% income from property would not make her reach her personal allowance. The big qiestion is: if income is 50/50 as its supposed to be, would the HMRC / Work and pensions start to investigate why she was on benefits for that time and look for some recompense on those years and can they make a claim against her half of the house, which is now passed to me as 'Joint Tenants'? Even though she never received any of the income or profit on a sale. Or .. . would it be better to say I received 100% income and then pay the tax myself - even though it should be 50/50 according to HMRC. If I go the 50/50 route as it should be, then I would pay no tax. I don't want to open a can of worms and make things difficult with this declaration. Thanks

    #2
    You might have to explain to HMRC why all of the income went to your account, particularly if the mortgage was in your sole name.

    With a potential £5k tax bill, I would have a chat with a local accountant who will charge a few hundred quid and do the job properly.

    HMRC penalties are based on their view of your openness and co operation, so you don't want to be caught out being clever when you're meant to be resolving the issue once and for all.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment

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    • Caught out by changes to Capital Gains Tax
      by reluctantlandlord1976
      I appreciate 'ignorance' is no excuse, however there are some mitigating factors, i.e. due to illness etc.

      1. Previous family home rented out - terrible tenants - left owing rent, bad repairs etc. [usual story for some] subsequently property not let for 2 years for a number of reasons while...
      06-12-2021, 13:51 PM
    • Reply to Caught out by changes to Capital Gains Tax
      by jpkeates
      You have to make the return to tell HMRC there is no tax to pay, if that's the case.
      There is no option not to tell HMRC....
      09-12-2021, 09:58 AM
    • Reply to Caught out by changes to Capital Gains Tax
      by Gordon999
      I think Andrew is correct .

      You start with 1/3 interest ( in 1982 valued at £6500 ? ) plus 1/6 interest from parent1 ( valued at £20K ?) plus 1/2 interest from parent 2 ( valued at £60K ? ). This probably takes your total entry cost to around £40K.

      Your total capital...
      09-12-2021, 09:47 AM
    • Reply to Caught out by changes to Capital Gains Tax
      by reluctantlandlord1976
      Hi Andrew
      First of all I've got an initial appointment to speak to an accountant on Friday!

      Can I just check where you write ' ...at death 1/6th of the value of the whole would have been deemed to pass to you for CGT purposes as the survivors would share the whole'.

      Does...
      08-12-2021, 18:02 PM
    • Reply to Caught out by changes to Capital Gains Tax
      by jpkeates
      Even if probate wasn't mandatory, it would probably have been useful.
      08-12-2021, 13:44 PM
    • Reply to Caught out by changes to Capital Gains Tax
      by AndrewDod
      Yes this would be the case if it was jointly owned (not as tenants in common). The situation would be that at death 1/6th of the value of the whole would have been deemed to pass to you (for CGT purposes), as the survivors would share the whole.

      So for the 3 periods you would be taken...
      08-12-2021, 12:51 PM
    • Reply to Caught out by changes to Capital Gains Tax
      by reluctantlandlord1976
      jpkeates
      There was no estate as such, property jointly owned - they were both retired at time of purchase living on small pensions, hence I bought with them so they could stay in the home they'd been renting from council from early 1950s to March 1982 at time of purchase. And I paid for the initial...
      08-12-2021, 10:50 AM
    • Reply to Caught out by changes to Capital Gains Tax
      by jpkeates
      I don't know the historic thresholds, but it's bizarre that there's no probate for both of your parents, their estate has to be tiny for that to be possible nowadays.
      It's probably too late for HMRC to do anything about that, but that process sets the values for CGT calculations later on, so it's...
      08-12-2021, 10:28 AM
    • Reply to Caught out by changes to Capital Gains Tax
      by reluctantlandlord1976
      Morning Andrew
      Thanks for your response early this morning and clarifying I have to make three separate calculations [the split wasn't clear on the CGT calculator].
      I understand the query on the value but this is an ex council house on a council estate [I feel I have to defend it here as...
      08-12-2021, 08:45 AM
    • Reply to Caught out by changes to Capital Gains Tax
      by AndrewDod
      As gordon indicates you need to consider it in three entirely separate parts, each have their own gain and calculation --

      The part YOU owned before Death 1
      The part YOU owned between Death 1 and Death 2
      The part you owned after Death 2

      Based on the values you give...
      08-12-2021, 05:52 AM
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