On Tuesday 5 March 2013, HMRC announced the Property Sales Campaign (PSC) aimed at individuals who have sold or disposed of properties in the UK or abroad and failed to properly report their tax liabilities to HMRC.
Under the terms of the PSC, people can pay the:
- capital gains tax arising on the disposal of the property;
- income tax arising on rental income generated; and
- any other tax liabilities that may exist.
People affected by the PSC have until 9 August 2013 to tell HMRC they wish to participate and until 6 September 2013 to make the disclosure and pay any liabilities.
To register people need to complete an online form and either email it or print it off and post it to HMRC, alternatively the notification can be made over the phone. HMRC require the taxpayers name, address, NINO, and UTR (if applicable). In return, HMRC will send a unique Disclosure Reference Number, and a Payment Reference Number.
There are a number of restrictions and conditions that will be applied; the most notable being that property developers – whether sole trader, company or partnership – cannot participate in the campaign. Trusts are also excluded.
There are no special terms for the tax-geared penalties that may apply to the tax paid late. HMRC make it clear that taxpayers or their advisers should assess the correct level of penalty. This is not a straightforward exercise because:
- if it can be demonstrated that a genuine mistake was made there is no penalty payable;
- if the person was careless the penalty is a maximum of 30% of the tax paid late; and
- where the actions would be deemed to be deliberate by HMRC the maximum penalty for UK income and assets is 100%, and up to a maximum of 200% for assets and income received from overseas territories.
In some circumstances, the PSC does allow the outstanding liabilities to be paid by instalments.
HMRC have provided a calculator to help work out the overall liability for taxpayers with straightforward tax affairs. This calculator unfortunately only applies for tax years 2007/08 – 2011/12, so working out the penalties and late payment interest for earlier years is the responsibility of the taxpayer.
In most situations deciding whether your client should take advantage of the PSC is relatively simple; however, some caution is required where a person’s tax affairs are complex – for example where there is an overseas structure, or where there is a risk that HMRC will suspect that tax fraud has taken place. In such circumstances, it may be more suitable to utilise the Liechtenstein Disclosure Facility (LDF) as it offers immunity from prosecution and relatively lower penalties for more serious offences.