Theoretical question about Capital Gains Tax

saajan_12

FlorayG said:

Bookworm105 said:

FlorayG said:

Bookworm105 said:

FlorayG said:

Bookworm105 said:

FlorayG said:

user1977 said:

FlorayG said:

user1977 said:

Bigphil1474 said:

Presumably, when you come to sell, the solicitor handling the sale would be required to identify if there are any tax requirements to be met, including CGT. Also presumably, if they don't do that, they'd get it in the neck as well as the seller being chased for the unpaid tax.

No, where did you get the idea that solicitors go around policing CGT?

But it's much the same "how would they know" question for any other self-assessed tax, e.g. Income Tax for the self-employed - HMRC have their methods, and public registers such as the Land Registry are fairly obvious sources of information.

So someone could just not pay it, just like some people get away with a second self-employed income that they never declare? I would say most of the people I know have no knowledge of CGT and wouldn't have a clue that they might owe it

Rather worrying that they're getting involved in property investments with no understanding of the taxes involved.

But that's what I  mean - I read so many posts about 'accidental landlords' or people who inherited a house and don't know what to do about it, I bet loads of these people genuinely wouldn't even know they owed CGT

ignorance has never been a defence against a tax liability. 
failure to educate yourself on your responsibilities is justly penalised.
HMRC are informed of the details of all property sales and obviously given the sums of money involved and the ease of tracking bricks and mortar, they have invested in methods of identifying who owns what and who sold what

That's what I'm asking. So Land registry inform HMRC (which is what I originally assumed) and then HMRC will contact the seller with a tax invoice? so a seller can't just 'forget' it (or perhaps genuinely didn't know)?

Your post is suggestive that your attitude may be I am a criminal, I know the police are not everywhere so I think I can get away with my behaviour. You might, but you might be caught instead!

No it's not. I'm clearly asking what happens when people don't realise they need to pay CGT because they've never heard of it

and we are telling you it is exactly the same as doing something criminal, your ignorance of the fact does not mean the police won't come after you.

This conversation is going round in circles but what I gather as an answer TO MY QUESTION is that nobody is required to tell a person they need to pay CGT they need to find this out for themselves? Seems a bit slapdash as most people who will owe it probably only have one instance in their whole life, when they inherit, so huge numbers of people probably are not paying it and have no idea they owe it

No one is required to tell a person not to drive at 100mph on the motorway or to pay income tax on their cash in hand earnings. After all there's no speed limit signs on many motorways so someone who never passed a test *might* not know. Also might not know that you have to pay a part of wages to HMRC.. 

RogerPensionGuy

saajan_12 said:

FlorayG said:

Bookworm105 said:

FlorayG said:

Bookworm105 said:

FlorayG said:

Bookworm105 said:

FlorayG said:

user1977 said:

FlorayG said:

user1977 said:

Bigphil1474 said:

Presumably, when you come to sell, the solicitor handling the sale would be required to identify if there are any tax requirements to be met, including CGT. Also presumably, if they don't do that, they'd get it in the neck as well as the seller being chased for the unpaid tax.

No, where did you get the idea that solicitors go around policing CGT?

But it's much the same "how would they know" question for any other self-assessed tax, e.g. Income Tax for the self-employed - HMRC have their methods, and public registers such as the Land Registry are fairly obvious sources of information.

So someone could just not pay it, just like some people get away with a second self-employed income that they never declare? I would say most of the people I know have no knowledge of CGT and wouldn't have a clue that they might owe it

Rather worrying that they're getting involved in property investments with no understanding of the taxes involved.

But that's what I  mean - I read so many posts about 'accidental landlords' or people who inherited a house and don't know what to do about it, I bet loads of these people genuinely wouldn't even know they owed CGT

ignorance has never been a defence against a tax liability. 
failure to educate yourself on your responsibilities is justly penalised.
HMRC are informed of the details of all property sales and obviously given the sums of money involved and the ease of tracking bricks and mortar, they have invested in methods of identifying who owns what and who sold what

That's what I'm asking. So Land registry inform HMRC (which is what I originally assumed) and then HMRC will contact the seller with a tax invoice? so a seller can't just 'forget' it (or perhaps genuinely didn't know)?

Your post is suggestive that your attitude may be I am a criminal, I know the police are not everywhere so I think I can get away with my behaviour. You might, but you might be caught instead!

No it's not. I'm clearly asking what happens when people don't realise they need to pay CGT because they've never heard of it

and we are telling you it is exactly the same as doing something criminal, your ignorance of the fact does not mean the police won't come after you.

This conversation is going round in circles but what I gather as an answer TO MY QUESTION is that nobody is required to tell a person they need to pay CGT they need to find this out for themselves? Seems a bit slapdash as most people who will owe it probably only have one instance in their whole life, when they inherit, so huge numbers of people probably are not paying it and have no idea they owe it

No one is required to tell a person not to drive at 100mph on the motorway or to pay income tax on their cash in hand earnings. After all there's no speed limit signs on many motorways so someone who never passed a test *might* not know. Also might not know that you have to pay a part of wages to HMRC.. 

It reminds me of an old friend years back, he drove his car after drinking 6 pints of Stella and the journey he made clearly showed he was way way over the speed limits. 

He got to feeling very guilty a few daze later and actually went to his police station(when he still had one within 20miles away)

Desk Sargent thanked him for his honesty and said he must stop this behaviour, but no further action due to the way them laws worked at the time, I guess no proof to convict. 

I will guess any HMRC desk person will follow a different route to the about events. 

theartfullodger

How would it be calculated: That depends on CGT rules & regulations when sold - and since you, me,everyone doesn't know when that will be & what rates will be, who knows??

subjecttocontract

Normally a landlord would submit an annual tax return for a rental property to HMRC. When they sell they would stop submitting that tax return. That would likely flag up a disposal and a potential CGT liability. Simples.

user1977

subjecttocontract said:

Normally a landlord would submit an annual tax return for a rental property to HMRC. When they sell they would stop submitting that tax return. That would likely flag up a disposal and a potential CGT liability. Simples.

...assuming somebody had told them about Income Tax!

uknick

The whole question about who tells HMRC tax is due has always been down to the individual taxpayer.  Whilst systems have evolved to help HMRC keep track of payments e.g. PAYE, CIS and banks providing interest details to HMRC each year, there are still areas where honesty, or fear of the law, is the only way HMRC knows when a taxable event has occurred.

For example, IHT and gifts.  HMRC will never know of these unless they are told by the executor of an estate whilst completing probate.  Also with regard to IHT, I don't think HMRC actually check the validity of the financial information on the IHT return.   

Another is the selling of a 2nd property.  Whilst a solicitor is supposed to alert you to the possibility CGT may be due, that is all they have to do.  HMRC may well trawl the Land Registry figures, but how will they be able to track a property that has never been on their radar?

user1977

uknick said:

a solicitor is supposed to alert you to the possibility CGT may be due

I wouldn't say they are. It may of course be helpful for them to point it out, but I can't see you'd have reason to complain if they don't, it's pretty normal for terms of business to exclude any tax advice unless you have specifically asked for it.

uknick

user1977 said:

uknick said:

a solicitor is supposed to alert you to the possibility CGT may be due

I wouldn't say they are. It may of course be helpful for them to point it out, but I can't see you'd have reason to complain if they don't, it's pretty normal for terms of business to exclude any tax advice unless you have specifically asked for it.

Alert you to possibility of CGT is not the same as giving tax advice.

When my partner sold her house a couple of years ago there was some form of declaration she signed asking if it was her principle residence.  That is all the solicitor mentioned on the subject.  My brother had the same question back in about 2015 when he sold his BTL.  By "accident" he ticked saying it was his principal residence and as far as I know never heard anything from HMRC.   

Tucosalamanca

Working with Land Registry, the Valuation Office and local councils, HMRC have a good idea of what's happening with property transactions and ownership in general.
It's simple to investigate as record keeping is so good (and ever improving).
Very few properties won't be receiving council tax bills, even if land registry info is incomplete, a paper trail can be established.

HMRC can and do check the validity of information, I've answered queries from them/VOA on a couple of occasions when applying for probate.

In the scheme of things, I suspect that a tiny number of people 'get away with it'.

theartfullodger

subjecttocontract said:

Normally a landlord would submit an annual tax return for a rental property to HMRC. When they sell they would stop submitting that tax return. That would likely flag up a disposal and a potential CGT liability. Simples.

Almost certainly he will have to do another SA tax return after the sale.  SA done in arrears.