Overseas property owners are warned to be on their guard against increased scrutiny of their tax returns for under declared rent.
Accountancy group UHY Hacker Young revealed HM Revenue & Customs garnered 64% more money from investigating personal tax returns last year than in the previous 12 months.
Revenue was up from £268 million to £440 million – and much was raised from property owners with second homes overseas.
The firm warns HMRC has turned their inquiry focus on raising revenues from capital gains tax from selling second homes and buy to let property.
Bank accounts are also looked at more closely to try to detect undeclared property income.
Holiday let crackdown
HMRC also has a sophisticated online team looking at relationships between holiday property web sites and taxpayers.
Roy Maugham, tax partner at UHY Hacker Young said: “HMRC is trying to raise revenue across the board by undertaking increasingly painstaking investigations. They are now pursuing smaller infractions.”
“Previously, HMRC resources and manpower were only really used to chase larger amounts of money, but now a forensic approach is being used even for when it is just a modest amount of tax that is missing.”
“HMRC is also putting a lot of effort into double checking the amount of capital gains tax that business owners should pay on selling their businesses, as they know it is an area where they can pick up big slugs of extra money.”
“Calculating capital gains tax can be confusing, and people often make mistakes when they file their returns. Because the lump sums involved are higher than for many other forms of taxations, HMRC can ratchet up its returns quickly if it uncovers a mistake.”
Spurned partners paid for tax tips
One source that is giving HMRC a rich vein of information about personal tax returns is apparently spurned partners who are increasingly tipping off the tax man about the financial affairs of their partners.
Law firm Reynolds Porter Chamberlain has researched rewards paid by HMRC to informants have risen by 20% in the past year to almost £375,000.
Adam Craggs, tax partner at the law firm Reynolds Porter Chamberlain, said: “If the divorce is acrimonious, it is not uncommon for a spouse to turn HMRC informant. HMRC is under intense pressure to increase the tax yield for the Exchequer.
“They are increasingly resorting to unorthodox methods to get the job done, such as paying informers for tips.”
The firm claims estranged partners threaten to report their spouses as leverage to gain a larger share of a divorce settlement.
