Case Study – Let Property Campaign with HMRC
What Happened and Why It Matters
A client unknowingly failed to declare rental income and on the sale of a property. HMRC opened an investigation, triggering potential HMRC penalties for undeclared income. Passman Leonard’s Property Tax Advisors stepped in to manage the full disclosure process through the Let Property Campaign.
With careful preparation, accurate reporting, and strategic communication, we helped reduce their tax penalties and resolve the issue without further queries. This case shows how essential professional tax help can be when managing your obligations, especially under pressure from HMRC.
The Challenge: Undeclared Income from Property Sale
Our client had sold a property and did not declare this to HMRC. They were unaware that the sale needed to be included in their income tax returns, assuming it wasn’t relevant because the rental income had barely covered their costs as Landlords.
The issue came to light when they received a letter from HM Revenue and Customs stating:
“We have information that you have sold property X and it was not your main residence.”
This triggered a prompted disclosure—a situation in which HMRC contacts the taxpayer before any declaration is made. These carry higher penalties than voluntary disclosures, making the next steps critical.
The property had been rented out for several years, so both rental income and Capital Gains Tax (CGT) from the eventual sale had to be declared. Left unaddressed, this could have resulted in serious penalties for tax evasion, interest, and potential further tax investigations.
Step One: Taking Control of the Situation
We immediately took over as the client’s appointed tax agent by submitting Form Comp1 to HMRC. This allowed us to manage all communication and ensure the disclosure would be handled through the Let Property Campaign—a route that generally results in lower penalties than submitting multiple late self assessment tax returns.
From there, we began gathering the information required to calculate the client’s full tax liability, including both rental and capital gains figures.
Gathering the Right Information
To submit an accurate disclosure, we needed to reconstruct the client’s financial position for several years. This required a detailed fact-finding process, including:
- Estate agent statements from four tax years
- Bank statements showing council tax, utilities, and other property-related costs
- Mortgage statements to claim mortgage interest deductions (especially important due to the phased restriction on mortgage relief from 2018)
- Purchase and sale completion statements to calculate capital gains tax
- Employment income records, which we requested directly from HMRC since the client had not retained the P60s
This step was essential in proving that all expenses had been considered and the amount of tax unpaid was accurately assessed.
HMRC’s Access to Data: How They Found Out
During the process, the client asked a question many others in similar situations have: “How does HMRC even know I was renting this property?”
The answer lies in HMRC’s Connect system, a sophisticated data-matching tool that draws from sources including:
- The electoral register (to identify your main residence)
- Land Registry data (to track property ownership and sales)
- Bank information, employer submissions, and even Customs and Revenue systems
When undeclared income is suspected, HMRC may launch tax investigations, and in more serious cases, pursue prosecution for tax fraud or using fraudulent documents.
Submitting the Disclosure
Once we had all the required documents, we prepared a detailed submission through the Let Property Campaign. This included year-by-year rental income calculations, allowable expense claims, and full CGT computations. We were also able to apply Principal Private Residence Relief and Letting Relief, which helped reduce the CGT due.
We explained the client’s reasoning in the disclosure form—they believed there was no profit, and during this time they had been caring for their elderly mother, which caused them to overlook their tax obligations.
By managing the submission through this route, we avoided the £1,600 late submission penalty per missed tax return. The Let Property Campaign allowed us to declare the entire liability at once, reducing both stress and costs.
Calculating Penalties, Interest, and Final Payment
As this was a prompted disclosure, penalties were unavoidable. However, HMRC does allow for reductions based on cooperation, transparency, and proactive payment.
We carefully reviewed:
- The number of years affected and whether the unpaid tax was more or less than 12 months overdue
- Our client’s level of cooperation throughout the process
We ensured the final figures included the correct amount of penalty, interest, and tax owed. The client made full payment the same day the disclosure was submitted—helping to avoid any further late payment penalties.
We also sent HMRC a full breakdown of all calculations and assumptions in advance, anticipating their review process. This step helped us avoid delays and follow-up requests.
Final Outcome: Case Closed, Peace of Mind Restored
HMRC reviewed the disclosure, accepted all figures, and raised no further queries. There was no escalation to evasion or fraud proceedings, and no additional penalties were applied beyond what we had already calculated.
The client was hugely relieved, telling us:
“Thank you for all your help. Knowing that I can sleep well at night now that the disclosure has been made and all my tax affairs are up to date.”
What This Means for You
If you’ve received a letter from HMRC or believe you have undeclared income, it’s crucial to act quickly. The longer you wait, the more likely you are to face higher late submission penalties, late tax payments or higher interest.
Working with an experienced accountant or tax adviser who understands HMRC’s processes can mean the difference between manageable outcomes and serious punishment.
At Passman Leonard, we specialise in resolving complex tax issues with discretion and precision. We can help you take back control—confidently and compliantly.
Need Expert Tax Help?
✅ Confidential advice
✅ Full support with disclosures and appeals
✅ Minimise HMRC penalties for undeclared income
✅ Sleep better knowing your tax affairs are in order
Get in touch today via email info@passmanleonard.co.uk or call on 01895 434515.
Written by: Puja Shah, Director – FCCA, CTA
Author Bio: Puja is a partner at Passman Leonard and a specialist tax advisor with extensive experience in resolving HMRC investigations and complex tax queries. Her deep knowledge of tax regulations, reliefs, and allowances enables her to deliver strategic advice that supports clients’ financial growth and minimises tax liabilities.
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