Case study Home and two investments all in neg equity

Now for the very bad news and it is quite shocking so be strong Serren. But before going into that I must comment that I just did the numbers as it might be of benefit to you to get a clearer image of where you are at. It is quite amazing to me that despite having crunched numbers with the EBS and a financial advisor that the picture was not at all clear.

Tax on rental income and revenue

Until I read point 7 of your replies I though it might be doable. Whatever about the banks the taxman is the worst of all to deal with, in fact he doesn't generally do deals, he is constrained by legislation.

Quite unbelievable you have not registered the investments with the PRTB. If nothing else this thread should be a wake up call to any other people who have very foolishly done the same. I nearly got into trouble with this myself as when it was brought in in 2006 I missed it, (due to a pregnancy), and normally I'm on top of things but this was not well signaled in the media etc in my opinion. But Mr. Taxman doesn't want to know about that, and will show no mercy when you come under his radar. When I did find out about it I managed to sort it out, and indeed informed siblings and others about the PRTB as they too didn't realise the implications of not registering.

In your case Serren what this means is that all rental income is basically taxable because if you are not registered with the PRTB your main cost the mortgage interest is not allowable against rental income. On top of that is penalties and interest. I've done a rough figure and it is horrendous. It's so bad that I'm not going to write it down.

Solutions

1. Register now for the PRTB, and back date as far as you can.
2. As far as I know you cannot go back more than 4 years. Maybe someone somewhere knows a way around this, but for the life of me I cannot think how. They have changed the coding (registration numbering) about 2 years ago and therefore revenue would know from the actual number that it is not a number that would apply to 2006, 2007 etc
3. Hire a really good accountant to deal with revenue.

Problem

I cannot see how you can afford a tax bill, and the tax man will have to tax you and will have to impose interest and penalties. From the way you posted about this I guess you already know this.

Ultimately it seems to me your only option is UK bankruptcy. That would unfortunatly mean giving up your jobs. But it would wipe all debt. I haven't read the new insolvency legislation and do not recall it mentioning anything about tax. You would need a tax amnesty to solve the issue for you.

I suppose you could register now, send in tax returns from 2006 + and hope that revenue never audits you. But you'll have it hanging over you forever. It is not really a solution.