Posted: April 9, 2016
HMRC has announced it collected over £150m in unpaid capital gains tax last year, just days before the government’s planned cuts to the higher rate of CGT.
Overall, the taxman brought in £154m in unpaid CGT in the year ending March 31 2015, according to data provided by HMRC to private law firm Collyer Bristow.
HMRC’s local compliance team collected £115m of extra CGT, which came from individuals and small businesses, with the remaining £39m brought in by the taxman’s new Counter Avoidance Directorate, HMRC’s latest weapon in the battle against marketed tax avoidance schemes. Last year figures from UHY Hacker Young found that the UK’s CGT bill grew 43% to £5.5bn.
James Badcock, partner at Collyer Bristow, said: “The Revenue has had some real success targeting CGT avoidance schemes over the last few years, as well as lower-level abuse and error.
“A number of HNWs have come under scrutiny for using these kind of devices over recent years, often marketed to them by banks or niche tax advisory practices, and attracted by the promise of reducing tax on the disposal of very high-value assets- including interests in businesses, property or perhaps art or antiques.
“Whilst in many cases there is likely to be a legal justification for a scheme, HMRC can be expected to look closely at anything which it goes against the spirit of the law and of course any deliberate or negligent underpayment,” added Badcock.
Last month chancellor George Osborne announced in the Budget that capital gains tax rates will be cut from 6 April 2016, but residential property will still be taxed at current rates.
The higher rate of capital gains tax will be cut from 28% to 20% and the basic rate from 18% to 10%. However, a surcharge means that property investors have been excluded and will continue to pay the higher rate of CGT on second homes or properties.
“The decision not to extend reductions to this group- alongside soaring property prices, particularly in London- means many face a substantial CGT bill when they come to sell, and maintains the heavy pressure on the buy-to-let sector,” said Badcock.