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Let Property Campaign & Disclosure to HMRC

The UK’s Let Property Campaign, is a campaign run by HMRC for individuals who have undisclosed income in relation to rents received.

The Let Property Campaign gives you an opportunity to bring your tax affairs up to date if you’re an individual landlord letting out residential property in the UK while your are overseas.

If you owe tax or not on your letting income you’ll need to tell HM Revenue and Customs (HMRC) about the income you haven’t declared by making a voluntary disclosure or by registering for the Campaign.

Should you owe tax to HMRC due to your undisclosed rents and to obtain the best possible terms or settling these liabilities, you must tell HMRC that you wish to take part in the campaign. Once registered you then have 90 days to calculate and pay what you owe.

Who can take part?

You can report previously undisclosed taxes on rental income to HMRC under the Let Property Campaign if you’re an individual landlord renting out residential property;

* renting out a single property

* renting out multiple properties

* a specialist landlord, eg student or workforce rentals

* renting out a room in your main home for more than the Rent a Room Scheme threshold (https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme)

* living abroad and renting out a property in the UK

* living in the UK and renting a property abroad

* renting out a holiday home even if you use it yourself

You are not able to use this scheme to declare undisclosed income if you’re a company or a trust renting out residential property or if you’re renting out commercial property.

You may have become a landlord for many different reasons; you might not even think of yourself as one. This could be because you’ve:

* inherited a property

* just rented out a flat to cover your mortgage payments

* moved in with someone and need to rent out your house

You may have simply misunderstood the rules or been told differently.

Whether your errors were due to misunderstanding the rules, or you deliberately avoided paying the right amount, you should notify HMRC now rather than wait until they uncover the errors.

Should you wish to discuss further and take part in the Campaign or make a voluntary disclosure please call a GM Tax office local to you or submit an enquiry via our online enquiry form on our websites www.gmtax.com.au or www.gmexpattax.com

Proposed changes announced in 2018 to Principle Private Residence & Letting Relief

These changes to capital gains tax (CGT) are due to come into effect from 6 April 2020, but there will be a consultation on the details first.

From April 2020:

* Lettings relief will only be available to those who are in shared occupancy with a tenant.

* The final period exemption allowing Principle Private Residency exemption for the last 18 months of ownership as long as the property qualified for PRR at some point, will be reduced to 9 months.

* The final period exemption will remain 36 months for those who move into care and for disabled persons.

https://www.gov.uk/government/publications/private-residence-relief-budget-2018-brief

Changes with regard to rollover and accessing benefits from a QROPS

Following the transfer of UK sourced pension money to an Australian QROPS, it is then within the Australian superannuation system and will be covered by the Australian rules. However, upon withdrawal or rollover to another superannuation fund, UK tax charges may still apply to the money.

There are two different tests for this. Which one should be used depends on when the transfer of the UK pension money to the QROPS took place.

If it was before 6 April 2017 then UK tax rules will still apply if the member:-

Ø at the time of the rollover or withdrawal is tax resident in the UK or had been earlier in that UK tax year or in any of the 5 preceding UK tax years

If it was on or after 6 April 2017 then UK tax rules will still apply if the member:-

a. at the time of the rollover or withdrawal is tax resident in the UK or had been earlier in that UK tax year or in any of the 10 preceding UK tax years, or

b. a period of 5 years has not passed since the transfer of UK pension money to the QROPS took place.

If UK tax rules do not apply under the above tests, then a rollover of UK sourced pension money to a non-QROPS or a withdrawal by the member can be done without incurring UK tax.

Are you considering accessing your UK Pension Benefits?

With the introduction of Flexi Access you have the flexibility to access your benefits up to 100% of the value of your funds, I would suggest you discuss this in further detail with a suitable qualified professional on your ability to access your pension benefits when considering your options.

You need to be aware of changes that were introduced in April 2017 I f you are considering withdrawing 100% of your UK Pension Benefits as a lump sum payment (should your UK Pension Provider allow this option) as any lump sum paid in excess of the 25% tax free amount will be taxed in the UK by your pension provider.

You may be eligible to claim a part refund of the tax due to your entitlement to UK Personal Allowances from HMRC. Any tax paid on amounts over and above the personal allowance will be available to claim a foreign tax offset in Australia.

However, if you have other UK sourced income in the year of withdrawal that will utilise your personal allowances, they will not be available to reduce the UK tax due in relation to the lump sum payment. Should any of the lump sum payments fall into a higher rate tax band, due to the basic rate band being utilised by other income, additional tax may be payable to HMRC.

Taxation of a UK Lump Sum Payment

You would need to report on your Australian tax return the amount of the lump sum that relates to your applicable fund earnings. In general terms, the applicable fund earnings are the earnings on your foreign super interest which have accrued while an Australian tax resident.

You are only assessed on the income that you have earned on your benefits in the UK Pension Scheme during your Australian residency period. Earnings made during periods of non-residency, and contributions and transfers into the UK Pension Scheme, do not form part of the taxable amount when the lump sum benefit is paid.

Therefore, the ‘applicable fund earnings’ amount in respect of the lump sum received from each of the UK Pension Scheme would be calculated by deducting the Australian dollar equivalent of the amount just before the residency date from the amount on the day of receipt. Both amounts should be translated using the exchange rate applicable on the day of receipt.

We at GM Tax can provide you with a comprehensive guide to your UK & Australian tax position when considering accessing your UK pension benefits, please call one of our offices or sent an online enquiry via our website.