Tax

UK Taxman Collected More Than $174 Million In CGT Investigations Last Year

Josh O'Neill Assistant Editor 16 February 2017

UK Taxman Collected More Than $174 Million In CGT Investigations Last Year

Of the total figure, $68.5 million was collected from "wealthy individuals" and medium-sized businesses, Collyer Bristow's data showed.

The UK's tax collector over the last year collected an additional £140 million ($174.2 million) through investigations into unpaid capital gains tax, over a third of which came from “wealthy individuals” and medium-sized businesses, data from a private client law firm showed.

CGT is paid on all personal assets worth more than £6,000, excluding cars; property that does not qualify as the taxpayer's “main home” or any home that doubles as a business premises; any shares not held in an ISA or personal equity plan, and business assets. 

As reams of high-profile tax avoidance cases continue to flood the media – such as last year's Panama Papers scandal, for example – there is increasing pressure on tax authorities to crack down on tax evasion. 

Data provided by the UK's tax authority HMRC to Collyer Bristow, a private client law firm, showed that £55 million of the extra CGT collected related to “wealthy individuals and mid-sized businesses”, while the remaining £85 million was extracted from “everyday taxpayers and small businesses”. 

The statistics showed that this area of taxation remains a key focus for HMRC, and highlighted the necessity for taxpayers across the board to ensure their tax affairs are in order, Collyer Bristow said.

CGT is paid on the profit made when disposing of an asset. This includes selling the asset, transferring ownership, and exchanging it for gain or receiving compensation - for example, through an insurance payout. 

Changes to CGT rates were introduced in last years's UK Budget; the higher rate was reduced from 28 per cent to 20 per cent, and the basic rate was lowered to 10 per cent from 18 per cent.

The UK government has taken steps to cool the country's burgeoning property market, most notably when it introduced a higher rate of CGT that applies to disposals of residential properties, Collyer Bristow said. 

“Complications often arise when family members are involved, for instance,” said James Badcock, a partner at Collyer Bristow.

He added: “Typically, an individual does not pay CGT on assets given to their spouse, for example, but this changes if the parties involved separate and live apart, or if goods are passed to their business to sell on.

“Increasingly, we are seeing cases where parents transfer property to their children, usually as part of a lifetime gifting strategy to ultimately reduce exposure to inheritance tax. These transfers can give rise to a chargeable gain and where this goes unreported, [HMRC] is likely to investigate.”

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