How a Clear Explanation Resolved an HMRC Query

Tax Advisory

Sometimes what seems like a complex HMRC issue can be resolved simply with a well-structured response.

This recent case is a great example.

Background

A client and his wife purchased a property as part of their retirement planning.

They deliberately set the ownership structure at 95% / 5%, documented in a valid Declaration of Trust.

They reported rental income based on this split.

The spouse with 5% ownership had their share fall under the personal allowance due to a modest state pension.

In 2022, HMRC contacted the 95% owner under the Let Property Campaign (LPC).

A full disclosure was made and accepted, confirming the 95/5 ownership split.

More recently, HMRC approached the 5% owner, requesting a separate LPC disclosure.

The client responded promptly, explaining the situation and prior events.

Misunderstanding the letter wording, they submitted a Form 17 — not realising it cannot be backdated.

The client acted in good faith, trying to satisfy HMRC’s request, unaware that the Declaration of Trust alone wasn’t sufficient to split rental profits officially.

Our Approach

We aimed to reason with HMRC clearly and chronologically, outlining the key points:

The clients are of state pension age and not expected to navigate complex online tax rules.
There was no change in ownership; the beneficial ownership remained 95/5, supported by the Declaration of Trust.
There was no revenue loss to HMRC; the 5% share fell under personal allowance.
HMRC’s request to amend historical disclosures could undermine the finality of previously accepted settlements.
Some requested years were out of scope under TMA 1970 s36 on time limits.

We presented the case professionally, supported by facts and legislation, ensuring no room for misunderstanding.

Outcome

Within a few weeks, HMRC confirmed the case was closed with no further action required.

There were no amendments, penalties, or reallocation of profits.

This outcome was excellent, not only for the financial result but also for sparing the elderly couple unnecessary stress.

Lessons Learned

This case highlights key takeaways when dealing with HMRC:

Present your case clearly and chronologically.
Support it with facts and legislation whenever possible.
Act professionally and persistently, misunderstandings can escalate unnecessary inquiries.
Seek professional help early, it can prevent unnecessary penalties or stress.

Why Professional Support Matters

Our team prides itself on clear communication with HMRC.

It’s incredibly easy to feel the pressure from HMRC which can cause further confusion, seeking professional help ensures that HMRC are dealt with in clearly and with no confusion.

We help clients reach fair outcomes without unnecessary stress or financial loss, and are not afraid to argue the case when HMRC are overlooking important details.