HMRC Targets Second Property Capital Gains Tax

HMRC Targets Second Property Capital Gains Tax.

It has been widely covered online today and in National Newspapers that HMRC has confirmed that it is to target second home ownership and disclosure for taxes.

There are two types of taxes that are potentially due on second property

• Capital GainsTaxon profits (i.e.  increase in value)
• IncomeTaxon rental incomeprofit

HMRC is targeting

• People who own/have sold second homes
• People who own/have sold buy to let investment properties
• People who own/have sold commercial properties
• HMRC is investigating both UK property and overseas property.

HMRC confirmed an amnesty for those that have sold but not made tax disclosure, to do so before 6 September 2013.

Our view
Investors should take this move seriously.  HMRC knows when you have bought or sold property and they have various ways to do this

1. Stamp Duty Land Tax is paid when a property is bought (i.e.  they know you bought a property and they know when a new owner buys it off you.
2. They can order banks to make disclosures of international money transfers (both in and out).
3. HMRC has recruited 2,000 new tax inspectors.
4. HMRC has access to Companies House records just in case you have wrapped your property up inside a company.
5. HMRC has accessto Council Tax records and again can legally enforce disclosure of gas, electricity, telephone and water supply records.
6. You cannot just leave the UK and be exempt from Capital GainsTaxor IncomeTax.
7. There are special rules that apply forresidency, ordinarily resident and non-UKdomicile
8. There are new rules coming on 6 April for a Statutory ResidenceTest.
9. There are huge penalties and fines for non-disclosure and subsequent late payment of taxes due.

Our guidance
If you are worried about second property capital gains tax and income taxes that you may have overlooked, you must take professional advice.  Contact us.
It is better that you are proactive now rather than leaving it to chance.