Contact revenue or get professional advise immediately.
First of all you will have to pay stamp duty at the investors rate.
Then you will have to complete tax returns for 2004 and 2005.
The return for 2004 should have been paid by 31/10/05.
The final return for 2005 will not be due till 31/10/06
your return would be something along the following lines
Assumptions Purchase House 300,000
Interest rate 3.5%
Fixtures / Fitting: Furniture etc 5,000 This can be written off over 8 years
Expenses in improvments to house prior to letting is not allowed but can be claimed against CGT when selling property.
Decorations etc between lettings are allowed. If you get someone to do the work for you get a receipt. If you are doing the work yourself hold onto receipts for paint etc. You may have to produce in the event of an audit.
Rental Income 12,000
Less Expenses
Mortgage Interest only 10,500
Fixtures & Fuittings 625
Insurance 500
Bins 300
There are other expenses but these are the main ones
If you employ an accountant this can also be claimed here
Total Expenses 11,925
Profit 75
Tax @ 20% or 42% depensing on what rate of tax you pay
As you can see in this example the amount are small but better to get it sorted now. Things can change very quickly.
Your tenants can claim rent relief and it is only a matter of time before revenue catch up with you.
Hope this makes sense.
Also do a search using the search facility on AAM
Post crossed with Clubmans