I inherited my father’s house in 2012, and my son rented it until August 2018 when he bought the house.
I believe I am liable to pay capital gains tax (CGT) on the house my son bought, but how would the HMRC know that I’ve sold the house unless I reveal this information? Has it got ways of finding out about this type of transaction?
You may have to pay CGT if you make a gain when you sell or transfer property that is not your main home. This applies to a sale or transfer of a second property to your son.
The evasion of tax is subject to criminal prosecution. HMRC has developed a powerful computer program called Connect, which trawls databases of personal financial information and flags up discrepancies between what has been declared on a tax return and what it has found. This search is likely to include Land Registry records, council tax statements, utility bills and other documents where the name of an account holder is shown together with the address. Discrepancies could prompt a tax investigation.
A taxpayer who deliberately conceals information from HMRC is subject to a 100% fine of the tax payable and criminal prosecution. HMRC has the power to confiscate property to raise the proceeds.
It is a safer strategy to pay the tax owed. Indeed, there may be scope not to pay any tax on this transaction if you use your CGT allowance wisely. Speak to a tax adviser to see what tax you owe.