HM Revenue and Customs have announced plans to crack down on offshore tax evasion and one of the first groups to be targeted will be wealthy individuals who are not paying capital gains tax on foreign property. The 200-strong team of investigators will be collecting data on landlords, holiday home owners and residential property owners who have bought or sold a property but failed to include this in their tax returns. It is planned that £560million will be collected in lost revenue by 2015.

The investigation team will be using advanced data mining techniques to identify those who own property abroad and are potentially evading tax. The team will be scrutinising advertisements and other publicly available information and use risk assessment tools to find those who do not seem to be able to legally afford their property or those who do not appear to be declaring the correct income from their second homes, such as buy-to-let properties and rental properties.

HMRC has also recently announced that it will be targeting landlords who own more than three properties within the UK, focusing on North West England and North Wales. Other groups that the HMRC’s taskforces are bound to focus on in the near future are commodity traders and those with offshore accounts.

The move is intended to stop tax evasion amongst the 330,000 richest individuals who earn more than £150,000 a year. As David Gauke, the Exchequer Secretary to the Treasury commented: “The message is clear: there is no hiding place for tax cheats. The Government is committed to tackling tax evasion.” Others have expressed concern that it can be unfair to target overseas property owners who might not be entirely aware of some of the more complicated property regulations. As Gary Ashford from RSM Tenon said: “Taxes involving overseas properties can always be potentially complicated. It is not always the case that people have deliberately evaded their taxes.”

Legal and tax regulations for properties and especially overseas properties can sometimes seem rather complicated, but the HMRC has declared that honest landlords and businesses have nothing to worry about as the taskforces will focus on those who deliberately seek to evade capital gains tax. It is, however, still important to find out all legal requirements concerning your second home or property investment whether in the UK or abroad well before tax payments are due.

If you need legal advice on property, assistance with selling or buying a property, residential conveyancing or commercial property services, contact Morgan Kelly Solicitors for more information on our services.

Photo © Clarissa Blackburn