HMRC are using information they hold from the Land Registry relating to the sale of second homes. It has been reported that this will result in a targeted campaign where they will write to 1500 people at a time explaining that they have information that the individual has sold a house which is not their home and that this has not been declared on the tax return of the individual.
HMRC will also have details of the purchase price from the Land Registry (which is part of HMRC) and they are rumoured to be using this to calculate the tax due.
Often these homes will have been let and therefore this will also need to be taken into consideration. All of this is part of an ongoing campaign to get landlords to bring their tax affairs up to date and it is expected that a number of people will want to use this letter as a nudge to take part in the Let Property Campaign which is an HMRC disclosure facility designed to assist people to get back into the tax system.
Calculating capital gains and producing rental accounts for properties is more complicated than people think and often reliefs and allowances that can be set against the tax liability are overlooked or not claimed as people have not kept receipts.
The letters HMRC send can be very intimidating and are written to be so and usually imply lots of bad things can happen. They are deliberately written in this way to encourage people to take action.
HMRC now have a very powerful computer programme which is designed to use all information available to them such as property purchase and sale, and information they receive from letting agents and Councils, to actively target landlords and people with holiday homes where the income is not declared and where when they are sold any gain is not declared.
Often people do not declare rental income as they make losses and are also mistaken in believing that these losses can be used against the gain made on the sale of a property. It is not commonly known that even if losses are made people should still notify HMRC that they are letting a property and provide details of the losses on tax returns.
Often where a property has been held long term with a mortgage then these losses accumulate up until about 2009 when interest rates dropped and then the letting properties show a profit. It is important to calculate these losses to enable them to be set against any future profits. In many let property cases dealt with by Gilbert Tax very little tax is actually due on the rental income.
We were approached by an individual who had been selected for enquiry by the HMRC Hidden Economy Team based on information...read more...
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