Tax lawyers are advising clients to make the most of a HM Revenue & Customs property tax amnesty for unreported gains from sold or gifted homes by August 2013.
The Property Sales Campaign gives anyone who has sold or gifted any second or additional property, in the UK or overseas, the chance to disclose their income or gains and pay tax owed by September 6, 2013.
But to take advantage of this offer they must voluntarily tell HMRC by August 9, 2013, to qualify for a reduced penalty. After this date a higher rate of penalty, up to 100% of tax, will be levied by HMRC.
The amnesty is a chance to get out-of-hand tax matters back on track and to calculate the cost of paying missed tax from previous years, HMRC says.
Tom Lacey, a tax manager for advisers Moore Blatch, says the amnesty is good news for anyone who has sold a property and unwittingly not paid HMRC the appropriate monies.
Buy-to-let investors should seek advice from their solicitor or tax accountant on how to make the most of the amnesty, he adds.
Many property owners, particularly if they inherited or received the property as a gift, will be unaware that they must pay tax on any profit from the sale of the property.
The HMRC campaign also covers the sale of gardens for building plots, so property developers may also be able to take advantage.
To make a voluntary disclosure, property owners must complete the disclosure form, either online or through the post, telling HMRC about all income, gains and liabilities. Other income and gains not previously disclosed must also be notified to HMRC, such as rental incomes, profits from another business, interest on investments and capital gains from the sale of other properties or assets.
Calculating the capital gain must take into account details such as the size of the property, sale or disposal proceeds, purchase or acquisition costs, improvement costs and any relief that has been claimed.
Property owners can then work out the interest for late payment, assess the correct penalty level to reflect why the tax was not paid in the past and make payment for what they owe.