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CGT due for earlier year

CGT due for earlier year

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A client has received a discovery letter (similar to FirstTab) regarding information held by HMRC regarding property income. Again, this is a total non-disclosure. There is some income tax due and large CGT bill. Client wants to claim PPR but has no evidence of residence at all (basically the client did not live there so CGT is due!)

Anyway, client bought this rental property before marraige. Sold after marriage. Used profits from sale to build own marital home in Republic of Ireland. Client has been unemployed for about a year now and has no funds to pay CGT.

How will HMRC proceed to collect? Client claims the marital home is in husband's name only, so even if they pursue her into Ireland, there are no assets in her name.

Should she declare bankruptcy?

Any input would be greatly appreciated folks.......................

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By bernard michael bayly
23rd Jun 2011 14:15

Bankruptcy or not???

If the facts are as statedHas she got any other liablities eg credit cards,loans,overdrafts all of which would be captured in the bankruptcy and it therefoer may suit he to  declare her own. If not her choices are 2 - Do it herself of let HMRC do it. It is worth explaining to HMRC that she has no assets and test their reaction before you decide. It could be that they may write the debt off or not persue her. If the latter do nothing and ignore them

 

Make sure you are paid up front for any work done or you may find yourself an unsecured creditor. Additonally has she got the court petition fees for personal bankruptcy?

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David Winch
By David Winch
23rd Jun 2011 14:57

Niggling possibility

I am not sure what you have in mind as a "large" CGT bill, but it seems to me as if the client does not have a realistic possibility of making an offer to settle by way of tax, interest and penalty.

It occurs to me that HMRC may wish to look at the possibility of a criminal prosecution.  It would be necessary for HMRC in these circumstances to be able to prove the tax was evaded deliberately and dishonestly.

Prosecution is most unlikely if the client 'comes clean' about the facts and figures (even if she is unable to pay the tax) but do make sure that any disclosure to HMRC is correct and complete.

It is possible that it could be argued that your client has a legal right (by way of a beneficial interest) to a share in the matrimonial home, even though the 'deeds' are in the sole name of her husband.  The trustee in bankruptcy may want to look into that, as well as the history of gifts made in recent years.

Do not assume that the matrimonial home is held free of risk of any claims by HMRC or through the civil or criminal courts.

Talk to an insolvency practitioner for some advice before doing anything.

David

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