Don't Hide your CGT Profit

Tax officials are increasingly identifying sales via the Land Registry records to check tax returns says an article on the BBC.

Remember, if your property is not your main residence then CGT may well be payable on any profits taken.

Even in the recession, figures released show that in 2007-08 the Revenue raised £60m in extra CGT while two years later they raised £74m - an increase of 23%.

Special investigators set up in the past three years in the regional offices of HMRC have been sent to identify possible evasion.

"We risk assess returns using a variety of methods, as well as cross-matching database information, both our own and external," said an HMRC spokesman.

"Enquiries into the disposal of second homes is just one area we look at," he added.

Buy-to-let

CGT is payable on the sale of most assets, not just property.

The rules (but do get professional advice) 

Any profit made on selling a property is liable to CGT unless it is your main home at the time of the sale, or was your main home at any time in the three years before, though If you are selling, there is an annual tax-free allowance of £10,100 to set against CGT.

Even if there is still CGT to pay, you can reduce your bill by allowing for:

• the cost burden of buying the property (legal, surveyor and stamp duty).
• the cost burden of selling the property (agents and legal). 
• the cost of refurbishment, such as a loft extension or garage or conservatory.

It has been said that there is an appearence that HMRC investigators were increasingly challenging "enhancement" claims on tax forms because they were really for things like painting and decorating.  These do not qualify for exemption as they are not capital expenditure.

One expert has said that often, HMRC challenge the records for expenditure going back 20 years or more.