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September 16, 2014

HMRC's Latest Property Crackdown

HM Revenue & Customs have announced the targets of their latest Task Force.

The group to come under the microscope next will be property owners who are either letting or selling property and not declaring the income tax or capital gains tax due.

Initially the taskforces will be primarily focused on the South West of England and South Wales.

It is assumed that HMRC feel that a lot of people have second homes, holiday cottages or rented properties in ths area.  Also parts of these areas will have enjoyed significant growth in houseprices over recent years.

The taskforce will be looking for two types of undisclosed profits:-

1) Taxable gains on sales of properties

2) Rental profits

The taskforce is likely to review the Land Registry's records of properties bought and sold and then match each record to the taxpayer's tax returns for that year.

There could be difficulties in relation to complications around Principle Residence Relief, for the taskforce, but there should be ways of working out from public records who has and who has not lived in a property that has been sold.

HMRC say that their previous Taskforces have been successful unearthing an undisclosed gain of £400k+ made by a Barrister and a property consultant who now has a criminal record because of undisclosed property profits.

If a taxpayer thinks that they may have a gain which has not been disclosed to HMRC, then all is not lost.  The overall result will invariably be better, in terms of penalties and HMRC's general attitude, if a late disclosure is made.  Also time can be taken to look at all the reliefs available to a taxpayer, to make sure the taxable gain returned is as low as possible.

The method of disclosure can be discussed before it is made, but the avenues available now include the Let Property Campaign which potentially provides better terms for disclosure.



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