HMRC has launched a Property Sales Campaign aimed at UK-resident individuals who have sold a second home or buy-to-let property in the UK or overseas and have not declared, or under-declared, any Capital Gains Tax (CGT) which may have been due. It can also apply to any tax due on disposal of a main residence where the normal reliefs applying to such a disposal were not fully available (for instance, if it had been rented or was vacant for a sufficient period).
Property developers, companies and trusts are excluded from the campaign. In such cases separate advice should be sought.
People who come forward voluntarily are being offered ''preferential terms'' with lower penalties for a limited period. Key dates for availing of the Campaign are:-
- HMRC must be informed of the intention to participate by 9 August 2013; and
- Disclosure and payment of any liabilities, including penalties and interest, must be made by 6 September 2013.
A professional adviser may be appointed to make the disclosure on behalf of the taxpayer. This will be advisable in most cases as capital gains tax is a particularly complex area of the UK tax code.
Full Disclosure
It should be noted that, at the same time as disclosing any relevant capital gains under the facility, full disclosure must also be made of any other undeclared tax liabilities in respect of all other income and gains accruing to the same individual. The Disclosure Form also gives the taxpayer the opportunity to "resolve any issues relating to VAT, Inheritance Tax or Domicile". Making use of the facility must therefore be regarded as both an opportunity and a requirement to make a full tax disclosure and bring the taxpayer's affairs fully up-to-date.
Time to Pay
HMRC have indicated that, where individual circumstances support it, they may accept payment on an instalments basis.
Reduced Penalties for Limited Period
The Disclosure Form invites the taxpayer or his/her adviser to "self-assess" not only the underpaid tax and interest but also the level of tax-geared penalty due. As the Disclosure will be deemed to be unprompted, the rate of penalties applicable is much reduced:
- Non-deliberate mistakes (known as careless mistakes) carry no penalty;
- Where a property has been disposed of at a gain and not yet declared to HMRC but not deliberately concealed from HMRC: zero penalty for any gains arising in 2011/12 (the most recent tax year which can be included in the Disclosure) and 10% for gains arising in previous years;
- Where a taxpayer has deliberately withheld information regarding a taxable gain from HMRC by not filing a return or by deliberately filing a return showing a lower amount of tax payable: a 20% penalty is applicable.
Penalties may be higher in cases where steps have been taken to deliberately conceal taxable gains.
Given that the standard rate of penalty for deliberate but not concealed omissions can be up to 70%, this is a good opportunity for taxpayers to come forward and make a disclosure.
Consequences of non-Disclosure
HMRC have indicated that they have been gathering information on the sale of second homes, particularly from the Land Registry. They have indicated that they will use this to pursue cases of tax evasion after 6 September 2013, where those individuals have not come forward under the disclosure facility. In these cases there may be exposure to much higher penalties and there may be no opportunity to pay by instalments.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.