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Receipts from capital gains tax (CGT) enquiries have increased by 23% over the past two years, UHY Hacker Young has discovered.
Data obtained by the accountancy group under the Freedom of Information Act shows that CGT investigations raked in £73.6 million in 2009/10, compared to £59.7 million in 2007/8, when HMRC created their first special teams to focus on capital gains tax compliance.
The rise was in spite that the total CGT due to the Revenue over the same period fell by nearly half, from £5.3 billion in 2007/8 to £2.5 billion in 2009/10, as the recession took its toll.
UHY Hacker Young tax partner Roy Maugham said the disparity in the figures showed ‘just how aggressive HMRC are becoming in tackling tax evasion in this area’.
He went on to warn that the taxman ‘is likely to step up activity to another level in the coming years’, following the change in yesterday’s Budget to the higher rate of CGT.
‘We expect this to go hand in hand with more aggressive compliance work to counteract the subsequent surge in CGT avoidance and evasion [the change] might bring,’ said Mr Maugham.
‘Gains on property transactions are a particular area of attention for HMRC. Other enquiries involve [the Revenue] challenging whether a property is really a taxpayer’s main residence and, therefore, exempt from CGT.’
According to UHY Hacker Young – which earlier this month claimed HMRC were preparing to widen the scope of their tax enquiries to include marginal cases, increasing the risk of innocent firms coming under scrutiny – the yield achieved per CGT investigation increased by 79% from £6,000 in 2007/8 to £10,800 in 2009/10, even though the number of enquiries into capital gains fell 31% from 9,900 in 2007/8 to 6,800 in 2009/10, underlining the increasing effectiveness at which the taxman's compliance teams operate.
An HMRC spokesman responded by saying, 'Our enquiries are risk-based,enabling us to concentrate our resources on the non-compliant, thereby reducing the burden on honest taxpayers.
'We risk-assess returns using a variety of methods, as well as by cross-matching database information, both our own and external. Enquiries into the disposal of second homes is just one area we look at.'
