HMRC refocuses avoidance effort around CGT

Capital gains tax increasingly appears to represent low-hanging fruit to HM Revenue & Customs amid figures showing the yield from people trying to avoid it has leapt 43% over the last year.

Following investigations into taxpayers and landlords suspected of underpaying CGT in the tax year from April 2011, HMRC officers collected £105.2m – up from £73.6m in 2010.

The average yield per CGT enquiry reflects the increase, having risen by 58% over the period – from £10,802 in 2010 to £17,082 in 2011 - the most recent year for which data are available.

“Clamping down on CGT avoidance has been fruitful for HMRC in the past, so it is not a surprise that they are refocusing their efforts on this sort of tax avoidance again this year,” said Roy Maugham, head of tax at UHY Hacker Young.

According to the group, property investors have clashed with HMRC over whether the property is the primary residence of the owner – which does not attract CGT – rather than a buy-to-let property.

“Gains on property sales are always likely to attract HMRC’s attention,” said Mr Maugham. “HMRC are likely to investigate very carefully such as ‘enhancement expenditure’ that has been carried out to a property, which can be offset against CGT.

“Disagreements may then follow as to whether some of these costs are related to general upkeep of a property or specifically to enhance its value.”

 

12th March 2013

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