In Roy Bevan v HMRC [2024] TC09225, a landlord was unsuccessful in his appeal against tax penalties assessed for his failure to declare small amounts of rental income over 15 years. The tribunal decided that "it was not objectively reasonable" for the Appellant to have failed to consider the ramifications of renting out a property.
- The appellant and his wife bought a property, lived there and, later, rented it out.
- They failed to Declare their Rental Income.
- HMRC made Discovery Assessments covering a 15-year period from 2006-07 to 2020-21 and assessed Penalties for failure to notify chargeability to tax.
The taxpayer appealed, he claimed that:
- He was unaware that Income from jointly let property is deemed by HMRC to be split, equally, between spouses.
- His own income was taxed at source under Pay-As-You-Earn (PAYE) and he had never been under self-assessment.
- He and his wife regarded all of the profits from the letting to be, exclusively, his wife’s income to make use of her personal allowance. Therefore, he had no reason to seek advice on the taxation of income and there was nothing that prompted him to check the correct position.
- The tax liability was small and he had paid the assessments as soon as receiving them.
The tribunal found that:
- While the Appellant may have honestly believed that he was not required to notify his liability to tax, having purchased a property which was subsequently let, in its judgment, it was not objectively reasonable for the Appellant to have failed to consider the ramifications. In those circumstances, the initial belief is not objectively reasonable.
- He had made no attempt to inform himself of the tax rules for letting property.
HMRC did not consider that the Appellant acted deliberately and the penalties were set at 20%. Reductions were further given to reflect the cooperation of the Appellant. The tribunal found that the penalties had been correctly charged.
Useful guides on this topic
Joint property rules
When property is held in joint names it is mainly taxed according to beneficial ownership. There is an exception where married couples and civil partnerships hold joint property. Trusts are also taxed differently.
Property profits and losses
What is property income? How is it taxed? How are profits calculated? How are losses relieved? Is National Insurance paid on property income? Is property income classed as a business activity?
Discovery Assessment
When can HMRC issue an assessment outside of the normal statutory time limits? What conditions must be met? Can HMRC issue two alternative assessments for the same period? What are your rights of appeal and defences?
Failure to notify chargeability to tax
What is failure to notify chargeability to tax? What happens if you fail to notify HMRC about your taxes? What penalties apply for failing to notify HMRC that you have a tax liability?
Penalties: Failure to notify chargeability
What tax penalties apply if you fail to notify HMRC that you are chargeable to tax? Can they be appealed or reduced?
External links
Roy Bevan v HMRC [2024] TC09225
