PEOPLE WHO HAVE SOLD their second homes and not notified HM Revenue & Customs of any profit made are being targeted in a clamp down on property tax evasion.
The Property Sales Campaign is examining the sale of properties both in the UK and overseas, where capital gains tax should be paid on any profits made, including properties people have sold that were given to them, and the sale of holiday homes.
A deadline of 9 August is in place to disclose undeclared profits, while any liabilities are due to be paid by 6 September and settled on the best possible terms should that taxpayer come forward first. However, any undeclared profits discovered after those dates will be investigated by HMRC, with any liabilities likely to attract harsher penalties.
So far, campaigns have raised £547m from voluntary disclosures, while £140m has been brought in through follow-up activity, including around 20,000 investigations. Previous campaigns have targeted offshore investments, medical professionals, plumbers, VAT defaulters, coaches and tutors, electricians, online traders and higher rate taxpayers with outstanding tax returns. There are also 13 criminal investigations underway, with five convictions already secured.
Stephen Goldstraw, partner at legal firm Manches, said: “Owning a second property can be appealing but it comes with a lot of tax problems, particularly if it is outside the UK. If it is rented out, there will be income tax to pay for overseas properties both in the overseas country and in the UK.
“If you sell it, there will be capital gains tax to pay – again both in the overseas country and the UK for foreign properties. You may also expose yourself to inheritance tax in the overseas country if you own a foreign property. It sounds as though many people are taking the easy way out and not declaring their ownership at all.”
HMRC’s head of campaigns Marian Wilson said: “It is better to come to us before we come to you. After the opportunity closes on 6 September, HMRC will use information it holds about property sales, in the UK and abroad, to identify people who have not paid what they owe. Penalties – or even criminal prosecution – could follow.”
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