Who is required to dislcose rental income to HMRC?
UK tax residents who recieve let property income from property in the UK and abroad must disclose their profits to HMRC, unless they are non-UK domiciled and taxed under the remittance basis (which is only available until April 2025). If profits have not been previously reported, UK tax liabilities may need to be disclosed using one of HMRC's disclosure facilities, for the entire period of UK residency, subject to HMRC's assessment time limits.
If you have never filed a UK tax return, you should register for self-assessment and continue to submit annual tax returns for the duration of the time you recieve let property income. Capital gains tax (CGT) on second properties owned in Dubai and sold for a profit would also need to be declared to HMRC.
Can HMRC identify property owners in Dubai?
While Dubai does not have a public register for property owners, UK taxpayers should not assume that HMRC is unaware of an undisclosed let property income. This is due to the UAE being an active jurisdiction for Common Reporting Standard (CRS) purposes.
The longer you take to disclose any UK tax liabilities, the more severe the financial repercussions and late payment interest charges will be. Financial penalities will be higher if HMRC 'prompt' you to make a disclosure. The worst-case scenerio is if HMRC deem errors or omissions to be 'deliberate' as this could result in criminal prosection.
Consequences of not disclosing property rental income
Failure to disclose tax obligations to HMRC can result in a formal tax investigation. Waiting for
HMRC to take action can also pose the following risks:
- Potential scrutiny of other aspects of your affairs, even where no issues exist
- Extended uncertainty, as enquiries can last months or years
- Higher financial penalties for failing to make a voluntary disclosure
- Loss of control over how the investigation unfolds
How to make a disclosure to HMRC
The Worldwide Disclosure Facility (WDF) is available to report offshore income and gains and should be used to report let property in Dubai. Where non-disclosure is deliberate, HMRC's Contractual Disclosure Facility (Code of Practice 9 or COP9) should be considered. This is the only avenue for individuals to avoid criminal prosecution.
If undeclared property income is part of a wider tax issue, seeking guidance from an experienced tax advisor can help ensure that the most appropriate disclosure method is used. Taking a proactive approach by voluntarily discosing any outstanding tax liabilities can help minimise risks and avoid unnecessary complications.
