Tax return toolkits revisited
When completing the Capital Gains Tax (CGT) section of your self-assessment return it would be useful to know where the Taxman can catch you out. Apparently, his CGT “toolkit†tells you just that. So what does it offer in the way of help?
Toolkit update
Several weeks ago we told you about the Taxman’s tax return “toolkits†(yr.10, iss.5, pg.1, see The next step).We’ve now received a preview copy of the first one planned by the Taxman. The idea behind them is to provide help with the issues and problems that crop up most frequently with returns and which often lead to tax enquiries.
First impressions
The first toolkit is on CGT. We’ve ploughed through around 30 pages of text and we don’t mind saying that the Taxman seems to have done a pretty good job. The bad news is that the toolkit isn’t available for the general public at the moment, which is frustrating because around 20% of all tax returns are submitted in the last few weeks before the deadline. So if you’re still battling with the CGT section of your tax return, here’s our summary of the Taxman’s top tips.
Tip. If you’ve already submitted your 2008/9 tax return, it’s not too late to take account of the advice in the Taxman’s toolkit. You have until January 31 2011 to amend or add additional information (see The next step), but we would advise doing it as soon as possible.
Taxman’s CGT wish list
We’ve given details below of the top three problems that the Taxman says can trigger questions or an investigation.
Valuations. If you’ve sold, transferred or gifted land, buildings, or unquoted shares (where you own 5% or more of the company) to someone connected to you, e.g. a relation or business partner, you must treat the transfer as if you received full market value for the asset. Even if you think you’ve included a fair value in your calculation, the Taxman expects you to be able to prove it. So you should get an independent valuation done (see The next step).
Jointly owned assets. If the capital gain you’re reporting relates to a jointly owned asset, e.g. one you own with your spouse, don’t forget to apportion all the figures, i.e. proceeds of sale, expenses, e.g. agent’s fees, and purchase cost.
Tip. Make sure the other joint owners are reporting exactly the same information as you. The Taxman does cross-check, and if he finds a difference, it’s bound to end in an investigation.
Property enhancement expenditure. If you’ve spent money on improving a property that you later sell, you can deduct the cost of making the improvement, but not if it no longer exists at the time of sale. For example, you can’t claim for the cost of building a conservatory if by the time you come to sell the house it’s been knocked down and replaced with an extension.
Put it on paper
We can’t over stress the importance of including as much relevant information as you can in the additional information section of your tax return. For example, if you’ve had a valuation of an asset done, tell the Taxman; it may stop a costly investigation.
For how to submit additional CGT information on your return (TX 10.07.06A) and how to get a valuation (TX 10.07.06B), visit http://tax.indicator.co.uk.
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