If you sell or dispose of a chargeable asset, then you have to pay capital gains tax (CGT) on the profit received. Most personal possessions worth £6,000 or more are captured by CGT rules, as well as property that is not your main home, shares that are not in a PEP or ISA, and virtually all business assets.
HM Revenue & Customs performs regular compliance checks on company tax returns and self-assessment tax returns. If you receive a nudge letter from a tax officer, or an inquiry is opened, talk to Collyer Bristow. We can help you defend your position and negotiate a favourable settlement with HMRC.
When do I have to pay Capital Gains Tax?
Whenever you sell a chargeable asset, CGT should be reported and paid within 30 days. It is up to you as a taxpayer to work out your gain. This is relatively straightforward where the asset is sold for market value, in which case the gain is usually the difference between what you paid for the asset and what you sold it for, minus costs.
Things get more complicated when you sell assets for less than what they are worth, give them away, or you inherited the asset – especially if you are claiming business asset disposal relief or investor’s relief.
Capital gains can also arise in other situations. Some of these, such as gains on Enterprise Investment Scheme shares, can be complex. Legal advice is essential in these situations.
What might trigger an HMRC compliance check?
HMRC conducts regular compliance checks into the tax affairs of any UK company, director or individual, and can open a tax investigation in respect of any tax liability, including capital gains tax.
The type and severity of the investigation depends on the facts of the case. At one end of the scale, HMRC may simply call for information. You should keep records evidencing your capital gains to prove your tax position. This includes invoices and receipts that show how much you paid for the asset and the value of the asset when you sold it.
At the other end of the scale is a civil action resulting in a penalty payment or even criminal action. This may happen where serious errors are made in the tax reporting and the accurate amount has not been declared.