How does the tax man know what we get up to ?

Merlin_of_Altofts

I am in the process of hopefully selling a second property in the near future and I have already done my calculations regarding Capital gains tax with a heavy heart.
I recently spoke to a friend and was having a moan about it, when he said "Don't declare it.!" I must have looked amazed but he then went on to tell me that his brother buys, renovates then sells two or three properties a year and never bothers to tell the tax man.
I am well aware of the implications of such a gamble and stated that surely there must be a mechanism within the system that either the solicitor, the bank receiving the proceeds or land registry must have some sort of duty to inform HMRC of the sale and therefore a chain leading back to the seller must exist, but he is adamant that his brother has never been tackled about his sales.
Can anyone confirm if any of the parties to the sale or proceeds do in fact forward details on ?

silvercar

I would have thought that there would be a link between the land registry and the Revenue!

Far better to take all necessary and legal steps to minimise the tax, rather than be caught out and face a huge bill and penalties.

Has your second property been let out? Was it ever your Principal Private Residence? How much profit have you made on it and how long have you owned it?

in_my_wellies

Perhaps if his brother renovates them he is able to hide the true profit so capital gains disappears.

RayWolfe

Someone always knows someone who ...
Let your conscience guide you and you will sleep at night in the knowledge that you have done the right thing. You have made some money; pay your dues or someone worse off than you will have to pay them for you.

moonrakerz

Merlin_of_Altofts wrote:

he then went on to tell me that his brother buys, renovates then sells two or three properties a year and never bothers to tell the tax man.

I would take some of these stories with a pinch of salt - his brother is probably just breaking even (if that), but wants everyone to think he is making a fortune !

Mikeyorks

There's a direct link if Stamp Duty is involved. As the SDLT database is run by HMRC. And the 8 page return gives them a lot of detail. And there's an indirect link if you put the proceeds into an interest paying account - as your provider declares any interest to HMRC.

Last time I sold .. I put the proceeds into a newly opened annual account. As I didn't want the interest being created in the current tax year. Within 2 months I had a revised Code Number from HMRC with an HR restriction which reflected the sum temporarily in that account. Very coy when I rang them .. but swiftly removed the restriction when I pointed out no interest was payable that year. But I got a P810 to complete the next year .. as they'd just taken me off SA because my affairs are 'simple'.! So yes - their intelligence is normally greater than is generally perceived.

And 'I know someone who gets away with it' .. is rarely the whole truth. Also CGT is not likely to be applicable to the case you cite.. as they're clearly running a business.

peter999

Well, you could always be banged up in jail for Tax Fraud.
Test the system & see.

Send us a postcard.

Merlin_of_Altofts

Thanks Silvercar.

In response to para 3 of your reply. The property was bought for £62,500 6 years ago and will sell at £145500. I have not let it out for rental as I put my mother in rent free for life but it got too big for her and she has now taken on a small council bungalow (and rent !). I prefer to sell it rather than rent it out now and basically having looked at deductions relevant to the purchase and sale, taper relief, enhancements and our yearly exemptions (it is owned jointly with my wife) we are looking at a CGT bill of about £10,000 in total.
I am self employed, my wife is employed and as far as HMRC are concerned I have to declare the gain in my tax year that ends in January 2008 to pay in Jan 2009 but my wife has to declare it this year -sale before April and pay her share in January 2008. I calculate that with a decent stay of executiuon for paying, we should at least accumulate a decent amount of interest. Any suggestions where best to put it ? We have two kids and already use their savings account - obviously for the best interests of the kids !!

Merlin_of_Altofts

Yes, It will probably result in one of our long term DSS claimants having to do without his latest pair of Nikes or a PS2, can't be having that.

Merlin_of_Altofts

Thanks for that. Three meals a day and and a ready supply of alcohol and drugs. That's why prisons are full !

Merlin_of_Altofts

Thanks MikeYorks,

I have been contacted by my own bank in the past when I put a decent cheque through from a long awaited policy and I think that they have to tell the taxman, although of course they may well be trying to flog me something as well !