HMRC reveals that a new taskforce in the North West and North Wales has been set up to target property owners who “sold one or more properties and haven’t paid Capital Gains Tax or disclosed rental income” – with an expected £5 million to be recouped. How can YOU make sure that you don't fall foul of Mr Taxman?
What are HMRC's taskforces?
Since their inception in 2011-12, HMRC’s taskforces have already recovered over £190 million in unpaid tax, £12 million of which being directly attributable to the property rental sector in London, south east England and Yorkshire. The overall target is set to bring in over £100 million during the current financial year. Jennie Granger, Director General of Enforcement and Compliance explains, ... “The people being targeted (...) have no intention of playing by the rules and could end up facing a heavy fine or even a criminal conviction”, citing as examples the recent and successful prosecutions of a barrister from London and a property consultant from Hertfordshire, who both were found guilty of property tax evasion – and who should have known better, given their status. The warning is crystal clear, “If you haven’t declared all your income, we will find you and investigate”.
Ultimately, it is down to you to ensure you comply with the tax system and abide by Capital Gains Tax regulations.
What is Capital Gains Tax?
In short, it is the tax that is due on the gain (not the monetary value) which is generated by the sale or disposal of an asset. While selling your car or your main home is exempt from CGT, the monetary gain from the sale of a secondary home or land is taxable, at a rate of either 18 or 28%, depending if you are a lower or higher rate tax payer. The annual exemption means that under current rates, you are not liable to pay any CGT for the first £10,900. As a broad example, if you sold a flat (which is not your main home) and made a gain (or profit) of £20,000 between the time you purchased it and sold it, your liability under CGT at the lower rate would be: £20,000 minus £10,900 tax-free annual exemption = £9,100 gain x 18% = £1,638. Of course, certain expenses you might have incurred for the property would need to be taken into consideration and could justifiably minimise your gain, and therefore lower your overall tax liability. Various tax reliefs and depreciation costs could also come into play, which is why it is always best to seek the advice from a reputable accountant or tax adviser (like TaxRefundPro) in order to work out the tax due – and minimise it within the rules.
The essential thing is to declare all sources of income and play fair to ensure your tax affairs are in order and beyond reproach. So if you are a property owner or a landlord and you receive rental income, declare it. Depending on the amounts you receive, you may not even be liable to pay any tax, but it is definitely worth checking out first rather than ignoring the rules. The cost of paying an accountant or a tax adviser to help with your tax return will not only give you peace of mind but in some cases should pay for itself when considering the tax you might save as a result.
TaxRefundPro’s tax return services include a free, confidential and no obligation assessment of your case by our qualified accountants. Our typical costs start from only £99+VAT per tax return. Call one of our consultants for a quote on 0203 137 5773.