Major Tax Concerns – Undeclared UK Property?

[Mark89]

My girlfriend needs advice as her dad is thinking about gifting or selling her a UK property – exact value unkown but less than 100k (permanent sitting tenants bring down value).

In this case it’s Not as simple as paying CGT of 20% to her dad which he can then use to pay Revenue so that he is not left out of pocket as a result of this generosity (seems only fair and I assume this is all there is to it normally?).

Story so far:


Her dad lived in a Manchester based property until he relocated here in 1980. When moving he placed a 100% re-mortgage on the property and the tenants who have never left (now sitting tenants) paid back the mortgage in full to the Bank ( they kept paying the rent and the mortgage was automatically paid over 20+ years without anyone getting involved – yes they could in hindsight lived there rent free!).

Realising only recently he is still the owner (he stupidly assumed the bank owned it until 2 years ago) he is really worried about what to do. All he wants is to be fully Tax compliant and ensure accounts/assets abide by revenue guidelines etc. He has done nothing for the last 2 years as he does not know what to do.

His accountant has advised “sell or transfer the property and no one will ever know and sure if you declare it now the revenue will take you to court and fine you for not declaring assets until now…and even if you transfer the property to your daughter and pay the CGT charge they will still fine and prosecute you for holding an offshore asset for such a long time without declaring it”. For ethical and legal reasons he has ignored this advice.

That still leaves him with unanswered questions about his current state of accounts and how to ensure full compliance etc.

Anyone got some advice?

Please help as my girlfriend is really stressed about this whole thing…and as a result so am I!!!! Btw, her dad is retired and his only asset other than UK prop is his principle residence in this country with small mortgage remaining.

If you need clarification on anything just post.

 

[ClubMan]

His accountant has advised “sell or transfer the property and no one will ever know and sure if you declare it now the revenue will take you to court and fine you for not declaring assets until now…and even if you transfer the property to your daughter and pay the CGT charge they will still fine and prosecute you for holding an offshore asset for such a long time without declaring it”. For ethical and legal reasons he has ignored this advice.

Ditch this seemingly dodgy accountant and get independent, professional advice from somebody who will give sound and prudent advice!

 

[Mark89]

Ditch this seemingly dodgy accountant and get independent, professional advice from somebody who will give sound and prudent advice!

Thanks for the rapid reply Clubman! do you know where I can get "independent, professional advice ..." and please don't say the golden pages?

I have tried a financial advisor and accountant both of whom don't deal with UK prop.

Do you recommend a Solicitor, Accountant, Fin. Advisor or other for this or a combination? If you have anyone in mind even better - Ideally based in south Dublin or City?

 

[Guest112]

Hi Mark

I think the solution is easy and you know it :

1) Your papa in law puts his hands up and declares everything to the revenue and takes his medicine
OR
2) The tax fraud continues.

The fact that he didn't realise that he still owned the house or had forgotten about it is a bit hard to fathom.

It seems to me that he is struggling with his conscience now and this is now more a moral issue than a tax issue.

 

[Mark89]

Hi Mark

I think the solution is easy and you know it :

1) Your papa in law puts his hands up and declares everything to the revenue and takes his medicine
OR
2) The tax fraud continues.

The fact that he didn't realise that he still owned the house or had forgotten about it is a bit hard to fathom.

It seems to me that he is struggling with his conscience now and this is now more a moral issue than a tax issue.

The fact that he was not aware he still owned the house is not the point. This guy is far from being the brightest spark, but he is well intentioned... i.e. not delayed guilt! This is a Tax issue that he wants to sort out since he became aware of it.

Put simply, he wants to ensure all is ok and needs expert advice as highlighted by ClubMan - if you or anyone else can give a recommendation of what type of advisor and a specific contact that would be great so that he can get moving on option 1 which is the only one he would ever consider! It's worth pointing out that this wasnt a case of having savings offshore or making money... he really didnt have a clue that he owned it (yes his daughter is a lot brighter and she is the only reason he became aware of it).

It's not really a case of calling revenue until he gets the appropriate advice about what steps to take so he doesnt make the situation even worse!

 

[ClubMan]

Thanks for the rapid reply Clubman! do you know where I can get "independent, professional advice ..." and please don't say the golden pages?

In Ireland IFSRA can give you a list of registered intermediaries such as authorised advisors and multi-agency intermediaries. No idea where to go in the UK. I would expect any good accountant/tax advisor to be able to assist. The existing accountant sounds like a chancer if s/he actually recommended what you say above.

 

[Guest112]

Mark

I believe he should contact a tax advisor with AITI qualification.

This is probably not such a difficult calculation apart from the fact that it spans 27 different tax years and probably both the Irish revenue and UK revenue will have an "interest" in the case

From what you say all the transactions will be recorded in one bank account, rent in and mortgage out with no other involvement from the owner of the property.

Im sorry if Im being over sceptical but I have had personal experience as a landlord and its hard to understand that the tenants did not seek any house maintenance whatsoever in 27 years and no communication, and that he originally left from there, 27 years ago with no forwarding address for the tennants to contact. There were no bank statements sent and that the man had completely forgotten that he owned a house. You may be right that this is not relevant to the question but in your case I would not relay this story to the Revenue. Whether its true or not its just not credible.

You are absolutely right to only make contact with revenue via a professional advisor.There is no shortage of these. Get him to act today before he forgets that he owns the house again.

 

[Newby]

In Ireland if you bring a tax "situation" to the attention of the Irish Revenue they mitigate some of the penalties that may (or more likely will) be imposed. The same may be applicable in the UK. Tax advice (or the proper variety) is definitely the right course of action.

 

[ClubMan]

Just to reiterate ... it would be prudent to only bring outstanding tax liabilities to the attention of the relevant tax authorities having first obtained independent, professional advice on how best to approach them and put the best case forward for possible mitigation of liabilities, interest and penalties.

 

[Domo]

One major problem could be whether or not he has details of the full rental income and expenses (I assume just mortgage interest) available for the 27 years.

If these are available, and calculations prepared and submitted both to the UK and ROI Revenue, I would imagine that penalties would be mitigated due to his owning up to the situation before he is actually found out.

If all details are not available, best extimates could be used, as long as they are realistic.

 

[ubiquitous]

His accountant has advised “sell or transfer the property and no one will ever know and sure if you declare it now the revenue will take you to court and fine you for not declaring assets until now…and even if you transfer the property to your daughter and pay the CGT charge they will still fine and prosecute you for holding an offshore asset for such a long time without declaring it”.

You should consider reporting this accountant to their regulatory institute for the obviously negligent (and illegal) advice.

As for finding a replacement, any member of the ICAI, CPA or ACCA accountancy institutes in Ireland should be in a position to offer better quality advice as regulation by their respective institute should ensure that they cannot be as reckless in their advice as above.
AITI members are not similarly regulated unless they are also members of one of the above accountancy institutes.

IFSRA-regulated financial advisors are neither regulated nor qualified for the purposes of providing tax advice (unless again they hold appropriate accountancy qualifications) and should rarely be relied on for this purpose.

 

[ClubMan]

IFSRA-regulated financial advisors are neither regulated nor qualified for the purposes of providing tax advice (unless again they hold appropriate accountancy qualifications) and should rarely be relied on for this purpose.

Apologies if my mention of such advisors was misleading.