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TaxRobin, Tax Consultant
Category: Tax
Satisfied Customers: 17644
Experience:  International tax
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Hi, My wife bought a small house in America in January 2013

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My wife bought a small house in America in January 2013 and has a renter in it currently. The income is $675 a month and there are some outgoings. She has been in touch with HMRC over where to declare the income but is now more confused than ever.

Today she received a penalty charge from HMRC for the 2013 year saying she has not submitted a tax form for 2013.

Can you clarify for us:

1: Should she be declaring the income in the UK
2: How does she go about this? Does she need to complete a tax return with her UK earnings and the US earnings for January - March 2013?
3. What can be done about the penalty notice. It advises that if the return is more than three months late it will incur a further charge of £10 per day, is this from the date of the penalty notice?

She is already registered with HMRC online but thought she could declare all earnings for 2013/14 together.

Thank you,

Rent and other receipts from properties outside the UK continue to be taxed separately as foreign income. The profits or losses are computed using trading principles just like those of a UK rental business.
The income received from the rental in Jan - Mar 2013 would be applied to her income in the UK for 2012-2013.
Yes, she needs to complete the return. The date to be concerned with is the 3 months from the filing due date of the return.
Please advise your wife that she is required to report the 2013 income.
She has the right to appeal a penalty.
She should use the appeal form, if one was attached. Otherwise she can send a letter. Your wife must appeal within 30 days of the date of the penalty notice or HMRC decision.

Customer: replied 3 years ago.

Thank you.


So she needs to complete a return for 2012/13 reporting ALL her income (UK salary and US rental earnings). What expenses can be put against income? For example we had the boiler serviced, fire alarms put in and we also pay a property manager. What about property taxes, are these a legitimate expense?


What grounds would she have for appealing the penalty?






Yes, you are correct she is required to declare all on her return. Rents and other receipts from properties outside of the UK are taxed separately as foreign income even though the profits and losses are computed using trading principles just like those of a UK rental business. So she allowed to claim the expenses. The amounts you pay for repairs and management allowed against the income. You can claim relief for tax paid in the US in the foreign pages section of the tax return. As with income from a UK rental business, you normally work out the 'net profit' (or loss) for all your overseas property lettings as if it's a single business. To do this, you:

 add together all your rental income

 add together all your allowable expenses

 take the expenses away from the income

There is no definition in law of ‘reasonable excuse’. Any reasonable excuse will be based on all the facts and circumstances of the specific case but the law does specify two situations that are not reasonable excuse: 1) A shortage of funds and 2) Reliance on another person.






TaxRobin and other Tax Specialists are ready to help you
Customer: replied 3 years ago.

Thank you.

You are most welcome.