It has been reported that homeowners whose properties have over 1.23 acres of land will soon have to face paying 28 per cent levy on gains on the sale of a home. The new plans are being called a ‘garden tax’ and is threatening to upset the long-held belief by many of those living in the UK that the profit of the sales from one’s main home are exempt from tax.
This new stance by tax authorities, whom revive the enforcement of rules on the statute book since the nineteen sixties, have claimed that the tax will affect those who have gardens that are over half a hectare in size, unless they can be shown to be “required for the reasonable enjoyment of the house as a residence.” However, it is feared that the government is moving towards a cap on tax-free gains similar to that in America, where only £250,000 of any profit is exempt, and furthermore the owners of the property will have to prove they have lived there for at least two years.
Her Majesty’s Revenue and Customs (HMRC) has already reported that the number of enquiries concerning tax payments on gardens has gone up from a couple a year to three a month. However, they also denied that it had “launched a campaign to look at private residence relief”, but confirmed that they were checking on transactions using a computer programme called Connect. This programme enables the HMRC to cross-check stamp duty records paid by homebuyers with capital gains tax declarations by sellers. In an interview to the Gary Heynes, tax partner at Baker Tilly, stated that “Our clients have to demonstrate the grounds they are claiming for are an integral part of the property with no hedges or streams that separate them for the residence.”
It will be important for anyone who is planning to sell property that has been previously to let to also consider the impact of capital tax gains, and if there is any uncertainty to contact their landlord insurance provider.