Offset the cost of improving your property in Chiswick, W4. But don’t upset the taxman.
Second home owners and buy-to-let landlords are to be targeted by HM Revenue & Customs. HMRC is searching Land Registry data to identify taxpayers who have bought and sold properties but failed to disclose these transactions in tax returns, says accountancy group UHY Hacker Young.
The Group says that Capital Gains Tax (CGT) enquiries focusing on residential properties have become much more common in recent months as HMRC is systematically searching Land Registry data. The enquiries typically involve taxpayers having to pay extra tax bills running into thousands of pounds. Geoff Davies, partner: “HMRC has clearly stated in correspondence that it has obtained information on taxpayers from the Land Registry, which is something we’ve not heard before.”
In a significant number of recent enquiries HMRC has argued that taxpayers have incorrectly offset some costs spent improving properties against CGT. Taxpayers are allowed to deduct the cost of work on a property from their CGT bill, but such work must be considered ‘enhancement expenditure’ and not maintenance.
Do you qualify to offset your Chiswick property refurbishment against tax?
If you are hoping to offset against CGT for work conducted on your house or flat in Chiswick W4, be sure you’re able to support your claim. HMRC often argues that some costs are repairs and not enhancements to the property, which regularly leads to disagreement during the course of an enquiry.
Christian Harper of Chiswick estate agent OliverFinn: “It is better to employ a good accountant to make sure any claim is above board. Avoid using cash-in-hand builders or tradesmen as you can’t claim against CGT without a valid receipt.
According to UHY Hacker Young, taxpayers who have bought and sold a number of properties over a relatively short period of time could face massive tax bills even if they have paid the correct amount of CGT.
This is because HMRC could claim that taxpayers who regularly carry out this type of activity are in fact engaged in a trade (property development) and therefore liable to Income Tax and National Insurance.
“I think this is a good thing for honest taxpayers,” says Harper. “It will assist in nailing bogus claims, and help dilute the black market of cash tradesmen, so they can all pay the same amount of tax as the rest of us.”
