So said Winston Churchill; and this week he may well be joined in his sentiment by many others following the announcement by HMRC that they are launching the ‘property sales campaign’, targeting those who have sold a property that is not their main home, and who have not told HMRC about any profits that they have made as a result. It is aimed at those selling homes where capital gains tax (CGT) should have been paid on the profits. One of the most obvious areas that is going to find itself the focus of HMRC is the buy-to-let market. There is a 9 August deadline for telling HMRC about any unpaid tax on the sale of a property and any tax owed must be paid by 6 September. After the latter date, HMRC has said that it will take ‘a much closer look’ at the tax affairs of people who have sold properties other than their main home but who appear to have paid no CGT. ‘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’, said an HMRC spokesman (this was shortly before he went to catch his flight – at taxpayers’ expense – to collect his humanitarian award at The Hague).
Death and taxes: those are the two certainties of life and those who practise tax evasion put more of a burden on those of us who do pay our taxes. But there are a couple of queries that immediately arise from the new HMRC campaign. By law we are required to retain any invoices or receipts for a 6 year period from the date of issue. What happens if HMRC discover a property that was bought in 2000 and sold in 2005 with £25, 000 gross profit. The sellers spent over £20,000 on an extension, but as it is now 2013 (outside the 6 year retention period) they have discarded the receipts that reflect the proof of work. What happens then? Are they guilty of being foolish? Possibly. Have they broken the law? No, but…. ‘tough’ say HMRC.
HMRC have not confirmed whether they have the resources to investigate this properly nor have they given the figure that they anticipate to recoup in unpaid CGT. Without wishing to be accused of sarcasm one does have to wonder at the economic sense of going after unpaid CGT and those who have avoided paying thousands of pounds as opposed to the likes of Starbucks and Google who have made tax avoidance into an art form and ‘owe’ millions. I am aware that neither of the aforementioned companies have broken the law, but neither has the individual who no longer has his receipts thirteen years later…
Finally one has to ask where does it stop? If there is no defined exit strategy and external threats arrive in the form of further taxes on second homes, what happens to property prices as everyone dumps their buy-to-lets?
I leave you with the thoughts of none other than John F Kennedy; ‘The tax on capital gains directly affects investment decision, the mobility and flow of risk capital.. the ease or difficulty experienced by new ventures in obtaining capital, and thereby the strength and potential for growth in the economy.’ I couldn’t have put it better myself.