HM Revenue and Customs (HMRC) have had difficulties in the past in checking on property sales to ensure that the ‘principal private residence’ exemption for Capital Gains Tax (CGT) is being used correctly. Notwithstanding the complexity of the legislation, HMRC have had no effective means of ascertaining whether the person selling a property also owns other properties.

There have been numerous cases in which HMRC have discovered that owners of a number of properties have made capital profits that should have been subject to CGT, but have failed to declare them. HMRC believe that this is a significant problem.

For this reason, new reporting procedures have now been introduced. Since 4 July 2011, when a property is purchased, it is necessary to submit a new-style form for Stamp Duty Land Tax purposes which shows the National Insurance number of an individual purchaser or the Unique Taxpayer Reference or VAT registration number of a company or partnership.

These references are the means by which HMRC maintain their records. Accordingly, a future sale will, in all likelihood, be cross-referenced to the relevant tax record. Similarly, purchases of a number of properties without any associated income being disclosed may well raise questions from HMRC.