Extra tax collected by HMRC from capital gains tax investigations jumped 46% in the last year to £266m up from £182m* the year before as HMRC stepped up scrutiny of capital tax planning, says Lubbock Fine.
Lubbock Fine says that HMRC has been targeting cryptocurrency investors and amateur “day traders” for CGT investigations. It has also been looking to collect more CGT from where an individual transfers shares or other assets to a family member for capital tax planning purposes.
Such transfers may crystalise a capital gain for the individual that is transferring their assets. HMRC suspects that many individuals are underestimating the size and quantity of their disposals in order to reduce their CGT.
The number of CGT investigations closed by HMRC rose 26% to 9,800 last year, up from 7,800** the year before. Underpaid tax discovered per investigation also rose from £23,333 to £27,142.
Graham Caddock says: “With inheritance tax planning around business assets becoming more common, HMRC is doing everything it can to ensure it collects every penny it can from those trying to reduce their CGT and IHT bills.”
“Families are increasingly finding that passing on wealth is no longer a straightforward exercise. HMRC is scrutinising these transactions far more aggressively – not just for unpaid tax but it is increasingly challenging how assets are valued in the first place.”
Cryptocurrencies also behind HMRC’s ramp up of CGT investigations
The rapid growth in crypto investing is creating another major new area of focus for HMRC’s CGT investigators. Graham Craddock says many younger crypto investors do not realise crypto profits are taxable and there is a perception that some crypto investors are more opposed to paying tax than the average investor.
HMRC has significantly expanded its efforts to identify crypto investors through its Cryptoassets Disclosure Facility, with individuals who fail to disclose gains facing substantial penalties and interest charges.
Graham Caddock says: “Cryptocurrencies were renowned for being the ‘wild west’ of investing. For many crypto investors this categorisation has stuck and many underestimate how seriously HMRC treats undeclared gains. Even worse, some crypto investors think that gains made through digital assets somehow sit outside the normal tax rules, which is exactly why HMRC is targeting the sector so aggressively.”
Similarly retail investors and day traders making gains through buying and selling shares are also in the sight of HMRC’s CGT investigators. Many younger traders who have never before made large sums of money are unaware that trading wins can create taxable gains that must be declared to HMRC.
Changes to Business Property Relief expected increase CGT investigations further
Changes to Business Property Relief announced by the Government are expected to increase the extra tax collected from Capital Gains tax investigations. HMRC will target family business transfers looking to avoid capital gains and inheritance tax. Specifically, HMRC will target those who they think have purposefully passed on business assets below market value to lower their CGT bill.
Graham Caddock adds: “Anyone disposing of assets or carrying out inheritance tax planning needs to ensure valuations are accurate and gains are properly disclosed. Mistakes or omissions that may once have gone unnoticed are now far more likely to result in an investigation by HMRC and potentially significant penalties.”
*Obtained from a Freedom of Information request to HMRC, year-end March 31 2025
**Obtained from a Freedom of Information request to HMRC, year-end March 31 2025
