Taxman scrutinises property amateurs

Published 18th Mar 2010

The taxman is targeting holiday-home owners and buy-to-let landlords to boost Treasury coffers as receipts fall with the rise in unemployment, accountants say.

The Revenue is trawling the Land Registry to identify people who have bought and sold properties without telling the taxman, Geoff Davies, of UHY Hacker Young, said.

“Capital Gains Tax inquiries focused on residential properties have become much more common in recent months and the Revenue is clearly stating that it has obtained information about individuals from the Land Registry — which is something we have not heard before,” Mr Davies said.

It is not just property sales that are under scrutiny. HMRC is also looking closely at second-home owners who have claimed maintenance costs in an attempt to reduce their CGT bill. They are allowed to offset the cost of enhancing a property but not repair or maintenance bills.

HMRC is also pursuing taxpayers who have bought and sold a number of properties over a relatively short period. It claims that in some cases people who regularly carry out this type of activity are engaged in a trade and are therefore liable to income tax and national insurance.

Mr Davies said: “Taxpayers who buy, renovate and sell properties without letting them could be considered property developers. Any gains would be taxable as income. The difference between CGT and income tax would mean a massive increase in the amount of tax they would have to pay.”

Doctors are also in the taxman’s sights. The Revenue has written to 28,000 doctors and consultants inviting them to disclose whether they have any undeclared taxable income.

John Cassidy, of PKF accountants, said: “The Revenue is only writing to those that it suspects have not declared all their income — and it probably has the evidence to prove it.”Those who make full disclosure this month and pay all tax due by the end of June, can expect an additional penalty of 10 per cent of tax due rather than 100 per cent. “My advice would be to come clean now. The chance to put your taxes right and suffer only a 10 per cent penalty is a pretty good offer,” Mr Cassidy said A Revenue spokesman said: “HMRC has a duty to ensure everyone pays the tax they owe, and ensure that those that seek to evade tax, do not do so. " The targeting of property owners and medical professionals marks a new chapter in the taxman’s attempts to search out fresh sources of income.

In its anxiety to close the yawning tax gap, the Revenue is moving beyond its usual suspects, such as builders and company directors.

Many GPs operate on a small business model, often employing their spouses. Payments to spouses could be seen as a “grey area” and the Revenue might seek evidence that £10,000 for secretarial services plus another £10,000 in pension contributions was justified.

It might also wonder whether a couple who had bought and sold half a dozen properties very quickly were unusually footloose — or undercover property developers.

These grey areas have existed for some time, so why this burst of activity? First, sophisticated software means the Revenue can “interrogate” the Land Registry database more effectively than it could five years ago.

Second, sending out letters with a veiled threat to thousands of people is a way for an overstretched organisation to achieve more with fewer resources — shaking the tree to dislodge the plums without having to pick them individually.

Or maybe tax staff fearing for their jobs simply want to show that they are worth retaining.

Source: ' Times '

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