HMRC have announced a new disclosure facility for individuals who have sold second homes, holiday homes or inherited or gifted property
And who have previously failed to report these sales as chargeable disposals and paid the capital gains tax due. Data from the last census has been used to establish that there are over 2.3 million individuals with real property that is not regarded as their main residence and who, therefore, potentially should be reporting disposals realising gains.
If you are resident in the UK then overseas property gains are reportable and taxable in the UK, even though tax may have been paid in the jurisdiction where the property is situated. Relief is available from “double” taxation but, nevertheless, the gain must be reported on a UK tax return and, if the individual does not normally receive a tax return for completion, it is his/her responsibility to request that a tax return is issued.
Inherited or gifted real property also falls within this regime and can trigger a capital gains tax liability and this is an area that is often overlooked.
There is a strict time limit which applies to the late disclosure of a chargeable disposal and the payment of the capital gains tax due. Disclosure must be made by 9 August 2013 and the capital gains tax must be paid by 6 September 2013. Penalties will still be levied but voluntary disclosures will attract a lower rate penalty than if HMRC open an investigation and “find” previously undisclosed property gains.
Many commentators have questioned HMRC’s timing for the announcement of this facility. Firstly, the property market is such that many properties are not even producing gains, and secondly, the closure date of this particular facility is not that distant and, particularly for individuals with overseas property gains, it may prove to be quite a challenge to get all the required information from past years by the 9 August closure date.
The rules relating to capital gains tax on property are complex so, if in you are in any doubt, then please contact us to discuss the situation and, if applicable, we can prepare the disclosure and a full capital gains tax computation for you and advise you on the inter-action with foreign taxes, if applicable.
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