Selling a second home and CGT. Paperwork involved?

uknick

Whilst I know the various CGT calculations involved in selling a second property, I'm not up to speed with the paperwork involved.

A friend is selling a second property after owning it for a fair few number of years. For most of that time it's been rented out to a tenant claiming housing benefit.

My friend isn't intending to tell HMRC about the sale and possible gain of about £100k.

It also appears they've never done a self assessment for the rental income; as they only ever broke even each year they didn't think they had to.

I've strongly advised them to tell HMRC but, if they don't tell HMRC, what are the chances HMRC will find out? Does the conveyancing solicitor complete paperwork which indicates if the property is the principal residence of the seller? Or, is it all down to the seller coming clean?

xylophone

https://www.theguardian.com/money/2013/mar/05/hmrc-tax-crackdown-second-home-sales

00ec25

the sale is notified to the Land Registry
the Land Registry informs HMRC
HMRC knows it is not the main home .....

uknick

00ec25 wrote: »

the sale is notified to the Land Registry
the Land Registry informs HMRC
HMRC knows it is not the main home .....

Apparently, and I say it with deliberate cynicism, they told HMRC 7 years ago it was their principal residence. I find this hard to believe as one would think it would trigger a flag against the housing benefit claim for the property if the landlord moves into the rented property.

And, I know for a fact, they lived in another property they had owned for 20 years and sold about 2 years ago with no CGT paid. Since then they've been in rented accommodation.

xylophone wrote: »

https://www.theguardian.com/money/2013/mar/05/hmrc-tax-crackdown-second-home-sales

I did find this link but, as it's 4 years since article and HMRC have made no contact about them renting a property out to an housing benefit claimant and not declaring it, I'm not sure how effective the clampdown has been.

I think you can gather from what I've said they appear to be a serial tax evader, and have got away with it in the past. Which is why I was wondering if people actually get caught if they've never been on HMRC's radar.

xylophone

Well, if you're sure of your facts, here's your option.....


https://www.gov.uk/government/organisations/hm-revenue-customs/contact/customs-excise-and-vat-fraud-reporting

Otherwise, if HMRC find out about the fraud/tax evasion...

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/594926/CC-FS18a_02_17.pdf

Why you should tell us about information that you’ve withheld before
we find out about it

If you know that you’ve withheld information, you should tell us straightaway. If you tell us about information that you’ve withheld before you had any reason to believe that we were about to find out abouit, we call this an ‘unprompted disclosure’. If you tell us about information that you’ve withheld at any other
time, we call it a ‘prompted disclosure’. The penalty percentage rate for unprompted disclosures will be smaller than for prompted disclosures.