16/02/17

UK: HMRC crackdown nets £140m

Investigations into the tax affairs of individuals and small businesses clawed back £140m in unpaid capital gains tax (CGT) to HMRC's coffers last year, reports FTAdviser.

The figures follow a report from the National Audit Office last summer that called for a crackdown on those avoiding capital gains tax when disposing of property.

Lawyers said that the figures show that CGT is still a major focus for the Revenue, and that taxpayers should ensure that they have their tax affairs in order.

“The Revenue has kept the spotlight on CGT avoidance schemes, abuse and error over the last year. It has proved a fruitful area for enquiries and they are likely to continue in this vein," said James Badcock, partner at law firm Collyer Bristow.

He said that £55m of the £140m of capital gains tax had been recovered from wealthy individuals, with the remaining £85m obtained from everyday taxpayers and small businesses.

Capital gains tax rates have recently been reduced, so that the higher rate is 20 per cent and the lower 10 per cent. However, for those disposing of residential property that is not their main residence, the rates remain at the higher level of 28 per cent or 18 per cent depending on earnings.

As well as property, capital gains tax is payable on all personal assets worth £6,000 or more, including your car, any shares not in an Isa or PEP and on the disposal of business assets.

Everyone has a tax free annual allowance of £11,100 for capital gains, while you are also exempt from paying it if you sell your main residence.

However, the National Audit Office said last summer that the capital gains tax exemption for primary residences cost £18 billion a year and needed to be monitored. 

"Reliefs reduce tax bills and may be exploited or used in ways that parliament did not intend," the NAO said.

Mr Badcock said that HMRC can be expected to look closely at anything that is "against the spirit of the law." Cases the law firm has seen include families that have transferred property to children as part of a strategy to avoid inheritance tax."These transfers can give rise to chargeable gains and where this goes unreported the Revenue is likely to investigate."

Taxpayers who underpay their CGT can face hefty penalties of up to 100 per cent of the tax owed, in addition to needing to pay the tax back.

An HMRC spokesperson said: “The vast majority of people pay the tax they owe. As these figures clearly show those who try to get around the rules are always challenged by our specialist tax collectors, to ensure that they pay the correct amount of tax due.”