March 6th, 2013
HM Revenue and Customs are to begin enforcing heavy tax fines on current and historically undeclared profits from the sales of second homes and buy to let properties. As part of the proposed penalties, HMRC will offer leniency through “preferential terms” by charging lower penalties for a short period. However, if guilty parties do not heed warnings and come forward, the taxation penalties will be far greater.
Dubbed the “property sales campaign”, the aim of the operation is to catch those who have sold a second property, but have not gone on to disclose the profits made from the transaction to HMRC. Many may not be aware that transactions of this type for homes sold either in the UK or abroad may attract capital gains tax, which will be required to be paid on the profits of the sale, including those homes that are either rented or used as a holiday home.
HMRC representatives said: “By using this campaign to come forward voluntarily, people will receive the best possible terms, as any penalty they pay will be lower than if HMRC comes to them first.” And Marian Wilson, head of campaigns at HMRC, explained: “Some people will not understand that selling a second home, a holiday home or a property disposed of as a gift could attract CGT. They need to look at our website or contact us."
The current deadline for disclosing taxable profits from property sales is 9th August, with tax owed to be paid back by 6th September. HMRC have warned that if both of these deadlines are not met, they will begin to closely scrutinise all affairs conducted by that person, over and above those related to the sale of second properties.
When selling a property which is considered the main residence, capital gains tax is not due to be paid. But, exemptions will not always apply if the property in question has not always been that persons only home or main property. The tax is likely to be charged if the property has formed part of a business arrangement, whether it has been let out or part of the property, such a segment of a garden, has been sold off. In all cases, HMRC advises that sellers should refer to their website.
On a related note, Simon Butler of specialist mortgage broker, Contractor Mortgages Made Easy noted: “Many people are also often surprised to find out that as part of divorces and seperation settlements, stamp duty land tax is payable in certain cases where one party will buy out the other from a currently jointly owned property. The proportion payable depends on the value of the property, and the difference between this value and what is owed on the property. Before considering these transactions, it’s a sensible idea to be aware of the charges.”
Article by: Jon Fields, Media Executive at Contractor Mortgages Made Easy
Media Contact: Raman Kaur, Public Relations Manager
Tel: 0844 44 88 80