We’ve learned this week that HMRC is investigating the capital gains tax affairs of those selling a second home.
Officials at HMRC will be writing to 1,500 people who they have pinpointed as having sold a second home, or a buy-to-let property in the 2015/16 tax year, but haven’t declared a profit on which capital gains tax could be liable.
The letters will ask the vendors to explain why they have not paid the tax that HMRC’s computer models — based on data from a variety of sources — indicate they owe.
Failure to respond or provide an adequate explanation could result in a formal investigation and fines.
Capital gains tax is a tax on the profit when you sell, or dispose of, certain assets that have increased in value. It’s the gain you make that’s taxed, not the amount of money you receive.
Some assets you can sell tax free, and you may also not have to pay tax if all your gains fall into your tax free allowance. There may also be specific additional allowances or reliefs available depending on the nature and use of the asset sold. However this does not mean you do not have to report the transaction.
Capital gains tax is liable if you make a profit when you sell:
A second home, or buy-to-let, clearly falls into capital gains tax territory. Even if any profit falls within your tax free allowance, HMRC will still want to know about it.
Potentially, HMRC could not only demand any unpaid tax, but also impose fines of up to 100% of the tax owing.
It’s clear from this that it’s more important than ever to get your tax right.
For help and advice on all tax matters, please get in touch with the team here at Optimum.