Entrepreneurs Face Fines Over Capital Gains Tax Errors, Azets Cautions

Entrepreneurs could face unexpected fines due to incorrect Capital Gains Tax calculations caused by an HMRC software issue, a leading tax specialist has warned.

Richard Major, National Head of Private Clients at international business advisory group Azets, is advising business owners to carefully review their previous year’s tax returns and ensure their figures accurately reflect the Capital Gains Tax changes introduced after last year’s Budget.

He explains: “Before the Chancellor announced the changes to Capital Gains Tax in the Budget last year, there was a whirlwind of sales and M&A activity as entrepreneurs and company directors sought to avoid being hit by high penalties. Although the changes weren’t as high as initially feared, there was still a jump from what they had been before.

“But HMRC didn’t have a chance to update their software before the change was introduced, so anyone who files their tax return directly with is likely to have an incorrect tax calculation as it will have been made on the old software and will be at risk of underpaying as a result.”

HMRC can issue penalties for returns which have been incorrectly submitted, with the expected fine potentially as much of 30% of the extra tax which is due. However, HMRC has launched a calculator to help taxpayers work out whether they need to make an adjustment to their tax returns and how much that could be.

Richard Major explains: “To use HMRC’s calculator, you’ll need to have a number of details to hand: the date of disposal, the amount of gains made, taxable income for the tax year, capital losses for the current and previous tax years, and details of any pension or Gift Aid payments for the tax year.

“The results of the calculations will need to be added as an attachment to the 24/25 return. This is due 31 January next year – and while this may seem like a long while away, I’d urge anyone who is affected by the changes to explore their options now, so they can save time, stress and eliminate the risk of being fined for an accidental underpayment.”