It’s been suggested that a Tory manifesto policy could create a tax loophole that would cost HMRC millions of pounds in lost revenue.

The Conservatives are suggesting that if they win the July 4 General Election they would declare a two year ‘CGT holiday’ for landlords who sold their investment properties to their sitting tenants.

The idea is designed to convince landlords to free up more housing stock, and also benefit long-term renters by increasing their chances of getting on to the housing ladder.

But Graham Boar – a partner at UHY Hacker Young, a national accountancy group, – warns that this risks creating a major tax loophole:

“The proposed CGT relief for landlords selling properties to tenants will be ripe for abuse unless the law is drafted very carefully. There’s a risk that landlords selling properties will structure them as tenancies leading to sales, avoiding huge amounts of Capital Gains Tax.”

“A landlord could also sell a property ‘on credit’ to a tenant, who could then sell it on with no gain and pay back their debt to the landlord. Either way, HMRC would miss out on huge amounts of tax.

“Drafting the law in a way that avoids the risk of tax avoidance is likely to make it very complex and difficult for taxpayers to understand. Nobody wants to see an even more complicated tax system in the UK.”

HMRC data shows that £1.7 billion in Capital Gains Tax was raised in 2022/23 from sales of second or additional homes. The majority of these are sales of investment properties by buy to let landlords.