An accountancy firm has warned buy-to-let investors who avoid paying tax on the profits from property sales that they are coming under greater scrutiny by the taxman.

UHY Hacker Young have warned that tax officials are increasingly searching Land Registry records to identify residential property sales by buy-to-let properties to make sure that tax return details are correct.

Under the Freedom of Information Act, they found that the tax office had retrieved an extra 23% in capital gains tax following a recent two year investigation.

The investigation led to additional CGT revenues of £73.6 million during the tax year ending 2010 compared with an additional £59.7 million two years earlier.

Roy Maugham, a tax partner at UHY Hacker Young said, “This is a massive increase in CGT from enquiry work, particularly as the amount of CGT payable has collapsed as asset values slumped during the recession. It shows just how aggressive HMRC is becoming in tackling tax evasion in this area.”

He adds, “With huge pressure on HMRC to maximise tax receipts to contribute to reducing the public deficit, it is likely to step up activity to another level in the coming years. With an increase in CGT a probable outcome of the emergency budget, we expect this to go hand in hand with more aggressive compliance work to counteract the subsequent surge in CGT avoidance and evasion it might bring.”

A spokesman from HM Revenue and Customs said, “Our enquiries are risk based, enabling us to concentrate our resources on the non compliant, reducing the burden on honest taxpayers. We risk assess returns using a variety of methods, as well as cross-matching database information, both our own and external. Enquiries into the disposal of second homes is just one area we look at.”

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