Buy-to-let crackdow

Chartered Accountants Northampton Harris & Co report that HMRC has seen a 43% increase in the amount of tax collected from Capital Gains Tax (CGT) enquiries over the last tax year, according to analysis from UHY Hacker Young.

The firm says HMRC data shows its investigations into underpaid CGT yielded £105.2m in 2011, up from £73.6m in 2010.

The average yield per investigation into CGT went up by 58% over the last year. In 2011 the average investigation yielded £17,082, up from £10,802 in 2010.

UHY Hacker Young says the increase in CGT yield is due in part to the HMRC targeting buy-to-let investors with a new taskforce set up in 2011 specifically to investigate the tax affairs of landlords in the North West and North Wales.

Roy Maugham, UHY Hacker Young head of tax warned that gains on property sales are always likely to attract HMRC’s attention. He cautioned that disagreements were possible over whether a property as a principal private residence or a buy-to-let investment.

‘HMRC are likely to investigate very carefully issues such as “enhancement expenditure” that has been carried out to a property, which can be offset against CGT. Disagreements may then follow as to whether some of these costs are related to general upkeep of a property or specifically to enhance its value,’ Maugham said