HMRC targets homeowners

HM Revenue & Customs (HMRC) is targeting holiday homeowners and buy-to-let landlords who have bought and sold properties but failed to disclose the disposals in their tax returns, an accountancy group has warned.

UHY Hacker Young said that capital gains tax (CGT) inquiries focusing on residential properties
have become more common as HMRC has begun trawling Land Registry data in a systematic manner.

While a person’s main residence is exempt from the tax, sales of second homes and buy-to-let properties may be subject to CGT.

“CGT inquiries focused on residential properties have become much more common recently and HMRC has clearly stated in inquiry correspondence that it has obtained information on taxpayers from the Land Registry, which is something we’ve not heard before,” said Geoff Davies, partner at UHY Hacker Young.

HMRC is also looking at taxpayers who have incorrectly offset costs spent improving properties against CGT. Taxpayers are allowed to deduct the cost of work on a property from their CGT bill but it must be considered “enhancement expenditure”, and not maintenance.

Taxpayers who have bought and sold properties over a relatively short period of time could also face extra tax bills, even if they have paid the correct amount of CGT. Davies warned that people who sold on properties without letting them could be considered property developers, making gains taxable as income - and hence a “massive increase” in their tax bill.