Figures obtained under a Freedom of Information Act request show that HMRC has significantly increased the amount of completed capital gains tax investigations. These have increased to 14,223 in 2023/24, up from 4,564 in 2022/23.
By Tom Annat
From our experience, we have seen an increase in HMRC letters being received by clients in relation to disposals of land and property. HMRC has good links with Land Registry and is clearly using data gathered on property disposals to target undisclosed gains.
Do you have a capital gains tax issue? Don’t wait for HMRC to come calling
If you have disposed of land and property then it is important to consider whether a taxable gain has arisen and whether this should be reported to HMRC. Penalties for non compliance can be far tougher if HMRC spots the issue first. Moreover, a taxable gain on UK residential property must be reported and tax paid to HMRC within 60 days of the completion date.
Income tax
In some situations, a disposal (and subsequent HMRC investigation) can lead to questions being asked about the use of the property. If the property has been rented, then there may be a historical income tax issue. It is important to remember that the deduction for mortgage finance costs are now restricted and capital repayments cannot be deducted at all. As such, landlords may incorrectly consider there is no taxable profit because rent does not exceed mortgage repayments (and other associated rental costs). However, this may not always be the case, and a disclosure could be required.
How we can help
If you have received a letter from HMRC then we have experienced staff who can help with any subsequent investigation. We can assist in dealing with the tax issue and obtaining the best outcome for you in terms of tax and mitigation of penalties.
Even if you have not been contacted by HMRC but consider you may have a historical capital gains or income tax issue, please get in contact and we will help you bring your tax affairs up to date.
