Recently we have seen a new batch of Capital Gains Tax (“CGT”) letters being issued by HM Revenue & Customs (“HMRC”) to those who they suspect have not declared the CGT liability due as a result of the sale of a UK residential property within the required 60-day time limit.

This is not the first time that such CGT letters have been sent by HMRC. Large batches of letters were sent in 2020, 2021 and 2022, with more letters coming as and when HMRC suspect that CGT has not been reported and paid within the correct timescale.

Our team have dealt with numerous enquiries over the last week from clients who have received "nudge" letters from HMRC stating that they should have reported and paid CGT on the sale of a UK residential property. What are the next steps in these circumstances?

A number of concerned clients have contacted us after having received such a letter, which states that:

“We have information that shows you sold the property above in the tax year ended 5 April 20XX”

The letter follows with:

“You should have reported and paid Capital Gains Tax if (both of the following):

· The property above is not your main home

· You sold it with a completion date between 6 April 20XX and 5 April 20XX”

The letter goes on to mention that the recipient must pay late filing penalties, interest and tax they owe now. HMRC’s Penalties Factsheet then explains that penalties for not having declared and paid the CGT due at the time could be up to 100% of the tax due as a result of the sale.

Quite a “nudge” to receive from HMRC and while the above may be true in certain circumstances, we have recently successfully responded to such letters where clients do not in fact have any tax liability and therefore no requirement to have filed a CGT Return with HMRC.

There are many reasons that you may have received a letter from HMRC asking you to check whether you should have paid CGT on the sale of a residential property. HMRC receive millions of lines of data each day from organisations such as the Land Registry or banks and if this data shows a discrepancy, this then alerts HMRC to a potential tax liability which has not been reported.

If you have receive one of these CGT letters, it is very important that you do not ignore it. Doing so may result in a formal investigation or enquiry into your tax affairs even if these have been reported correctly and in time.

In each case, we recommend that you seek advice from a qualified and experienced professional in order to check your CGT circumstances before replying to HMRC. Our Managing Partner, Charles Tateson, worked for many years within HMRC as a Senior Tax Professional and CGT Inspector and is more than happy to discuss how we could help you deal with such a letter.

This may include responding to HMRC with our reasoned argument as to why no CGT is due as a result of the sale of the property, explaining why HMRC’s view is incorrect. Alternatively, if there is CGT to pay as a result of the sale then we can assist you in filing the CGT Return with HMRC and ensuring that the tax due and any penalties charged are at the lowest possible amounts.

To see if we can help you, why not contact us for a free consultation? Call us free on 0800 0016 878 or email us at info@thetaxfaculty.co.uk for more information.

Capital Gains Tax Expertise: The Tax Faculty LLP Managing Partner Charles Tateson Named UK Capital Gains Tax Advisor of the Year 2023

The Finance Monthly Taxation Awards recognises the achievements of tax professionals from around the globe.

Winning such an award is no small feat. It is a reflection of hard work, extensive knowledge, and an ability to navigate the intricacies of the UK tax system.

Read more about Charles and the award here.

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