Research carried out by UHY Hacker Young shows that Capital Gains Tax (CGT) enquiries by NMRC have clawed in 23% more tax over the last two years.

From the data obtained by the company under the Freedom of Information Act, CGT investigations yielded £73.6 million in 2009/10 compared to just £59.7 million in 2007/8, when HMRC created special teams to focus on CGT compliance.

Yet the amount of CGT which HMRC calculates is payable has more than halved (-53%) over the same period, falling from £5.3 billion in 2007/8 to £2.5 billion in 2009/10 as the recession took its toll.

Roy Maugham, tax partner in our London office said: “This is a massive increase in Capital Gains Tax from enquiry work, particularly as the amount of CGT payable has collapsed as asset values slumped during the recession. It shows just how aggressive HMRC is becoming in tackling tax evasion in this area.

“HMRC established a new team specifically tasked to focus on CGT. With huge pressure on them to maximise tax receipts to contribute towards reducing the public deficit, it is likely to step up activity to another level in the coming years.

“With the increase in CGT announced in the emergency budget, we expect this to go hand in hand with more aggressive compliance work to counteract the subsequent surge in CGT avoidance and evasion it might bring.”
The research has shown that HMRC’s specialist CGT team has been trawling Land Registry data in a systematic manner, using this information to identify residential property sales by buy-to-let investors.

Roy Maugham added: “Gains on property transactions are a particular area of attention for HMRC. Other enquiries involve HMRC challenging whether a property is really a taxpayer’s main residence and, therefore, exempt from CGT.”