Capital Gains Tax when you sell your house – make sure you disclose all the facts to HMRC

19th June 2017

HMRC’s ongoing scrutiny of private residence relief is in the news again, with another case going before the First Tier Tribunal.

Mr & Mrs Ritchie were partially successful in their claim for relief on the sale of their home, which cost them less than £200,000 but which they sold to a developer for £2 million.

The lesson to be learnt from this case is one of the importance of disclosure, though.   Mr & Mrs Ritchie sold their home in January 2007.  Assuming that they submitted their 2006/07 tax returns on time, the deadline within which HMRC could enquiry into those returns would have been 31 January 2009.  They did not disclose any gains on their tax returns, believing that no tax was payable by virtue of private residence relief. But HMRC raised assessments in March 2013.  They needed to be able to show that the taxpayers had been careless in the completion of their tax returns in order to do this and they were successful.

In order to benefit from the protection of HMRC’s limited enquiry window, it is very important that taxpayers put all the facts before them and so here, even though no tax was thought to be due, the tax returns of Mr & Mrs Ritchie should have contained sufficient information to alert HMRC to the fact that the property had been sold, and the facts supporting the claim for private residence relief.

Although Private Residence Relief is a relief that affects most homeowners at some stage, the relief is fraught with complexities, as evidenced by the volume of cases that go before the tax tribunals.

Other items in Blogs
Harriet Sim
22nd October 2021 Self Assessment late payment penalties

HMRC are now issuing six month late payment penalty notices, as the due date for 2019/20 tax payments was over seven months ago (includes consideration to the additional months extension as a result of the pandemic). Taxpayers facing financial difficulties due to the impact of COVID-19 may have entered into a time to pay arrangement…

Nick Edgley
21st October 2021 Holiday lettings – declare to HMRC

If you own a UK holiday let are you declaring your rental profits to HMRC? If not time may be running out to make a voluntary disclosure of past profits.   HMRC has the power to request information, or documents, from third parties such as holiday booking sites; as well as being able to search…

Keri John
20th October 2021 Xero – Assigning Bills to Customers

You can now assign bills to customers in Xero!   This makes it easier to allocate expenses occurred during a job to the correct customer.   Perfect for Estate Agents, event planners and more.   When creating a bill to pay onto Xero there is an option to ‘assign the bill to a customer’. You…

Jake Day
20th October 2021 Minimising Your IHT Exposure

As Benjamin Franklin once said; the only two certainties in life are death and taxes. Although it’s a sombre subject, it is important to put in place the right planning so that when we are hit by one, we can avoid the other. We want to ensure we are able to leave as much of…

Paul Jefferson
19th October 2021 VAT Registration

A business must compulsorily register for VAT if taxable 12 month turnover exceeds £85,000. They can voluntarily register for VAT as soon as they start trading, providing they expect to make taxable supplies in the future.   Businesses that provide to other businesses may choose to register for VAT voluntarily before the registration threshold is…

Sharon Mace
13th October 2021 VAT DIY Scheme: HMRC update list of allowable expenses

There has been some controversy on claims made on DIY building schemes. HMRC have updated their guidance on goods and services that can be claimed under the VAT DIY Housebuilders’ Scheme.   The list is extensive and gives an ABC of items that are allowed, from Agas to woodworm treatment – but there’s a catch,…