Are you lucky enough to own a second home here or abroad? If you’ve sold it under the radar and didn’t take UK Capital Gains Tax into account, you could be in for a nasty shock.
Retrospective Capital Gains Tax on holiday home and second home sales
HMRC launched a campaign on 5th March designed to target people who haven’t declared their profits, the latest in an overall tightening of loopholes that has raised an impressive £547m through voluntary disclosure so far. They’re calling it the Property Sales Campaign and it applies to holiday homes and buy-to-let as well as any other property that isn’t your main residence.
What about the scale of the issue? A 2012 English Housing Survey found just under 2 million English households said they owned a second home. So it’s a big tax issue.
Turn yourself in by August 9th!
If that’s you, you need to contact HMRC by 9th August and, if you owe any, pay your tax by 6th September. Apparently you’ll suffer lower penalties if you make the first move rather than leaving them to find you.
Find out where you stand
In some circumstances it’s possible to be caught unawares. Two single people, each with their own home, might decide to marry. If this is you, did you realise there’s is a time limit of two years for choosing which will be your main residence? Hopefully HMRC will be aware of all the variations in circumstances and will let people know where there are concessions.
VAT and rented residential property
- Buying the property – People often ask me about VAT on let properties. The sale or letting of a residential property is exempt from VAT so there are no VAT charged on the sale price. But VAT applies to solicitors, estate agents and some other fees. While you may be treating the let property as a business, sadly you can’t reclaim the VAT involved in buying it.
- Letting the property – Letting income is exempt and there isn’t an ‘option to tax’ rental income. This means you can’t claim VAT on goods and services for maintaining the property, repairing it, visiting it, collecting rent etcetera.
Find out more
Here’s a link to HMRC’s page about the campaign: http://www.hmrc.gov.uk/campaigns/psc.htm