Act now to avoid penalties on income from second homes

Year Published: 2013

Her Majesty’s Revenue and Customs are currently carrying out a ‘property sales’ campaign, to review all tax that should have been paid as a result of the sale of second homes or from rental income received on property. They have given house owners until Friday, 9 August to notify them of any such income.

If any tax is then found to be owed, house owners will have until Friday, 6 September to pay the tax owed, although in certain circumstances, you may be able to agree to pay whatever is owed by instalments.

This campaign affects anyone who has sold second homes, or holiday homes, either in the UK or abroad.

HMRC is urging anyone who has sold a second home, or a holiday home either in the UK or abroad, to notify them about any gain that they haven’t previously disclosed, so that they can assess the right amount of tax that should have been paid and if necessary to set the correct level of penalty for not having previously paid. Penalties may be in the region of 10%-20% of the amount due on top of the tax paid.

House owners who are unsure as to whether they have previously paid the correct amount of tax may prefer to disclose their circumstances now, to avoid heavier penalties after the 9 August deadline. If house owners fail to disclose the information voluntarily, they could face fines of up to 100% of the tax due and/or prosecution. HMRC will be able to use house price data from the Land Registry to monitor transactions stretching back several years.

Whenever you are selling a house that is not your main residence, you should ensure that you disclose this to the Inland Revenue and, if necessary, seek specialist tax advice to ascertain what capital gains tax may be payable given all your circumstances.

If you require any further information on the sale of your property, please contact a member of our residential property team on 01260 282300.

 

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