Earlier this month, HMRC announced the launch of a task force wit the brief of tackling “tax evasion on property transactions in Greater London”. The taskforce is to target cases where there is a deliberate failure to comply with the Option to Tax regime.
The Option to Tax regime basically allows the supply of land or buildings, normally exempt from VAT, to be subject to the VAT regime. This can have many advantages including the ability to recover any VAT incurred in making that supply. However, in common with many taxation regimes the rules, options and exceptions mean that it is important to review options in depth before making an decision. These complexities include how new buildings constructed on previously opted land are treated as well as the challenges of defining the curtilage of a building on opted land.
As with any taxation regime, there is a difference between the scope of tax evasion and effective tax planning. In announcing the new taskforce HMRC stress that the task force is only designed to catch those who have deliberately broken the rules. They say that honest businesses “have absolutely nothing to worry about.”
It does have to be said though that in effective tax planning the devil is in the detail and it can be this very detail which is initially missed in review. Any business therefore which finds itself under investigation by this or any other HMRC task force is well advised to consult with their accountant or tax solicitor at an early stage.
This property tax evasion team is the latest in a series of task forces being launched to cut down on tax evasion. Although it is initially concentrating on the London area there is a full intention to broaden the scope to take in other areas of the country at a later stage.
As tax mitigation specialists Newshams are able to give advice on how Option to tax can impact on a tax planning strategy.
Contact us now on 020 7470 8820 and ask to speak to a tax adviser about the potential tax implications of property transactions or e-mail us at email@example.com and we’ll get straight back to you.
14 December 2011