The concept of nudge letters exists as it is government policy to educate and encourage taxpayers to pay the correct amount of tax at the correct time.
However, as HMRC has limited resources, it looks for trends where filing requirements are either misunderstood or not followed and issues these letters to push the compliance burden onto taxpayers. These types of letters have been issued in relation to various areas of taxation, including the taxation of rental income and offshore income.
The latest nudge letter from HMRC on holdover relief claims is specific to the 2021-22 tax year. It states that the recipient has 30 days to either amend their 2021-22 Self-Assessment return to remove the claim, or to submit/resubmit a valid claim form.
If action is not taken by that point, HMRC may amend the tax return, or open an enquiry into the form. This could lead to unnecessary discussions about undue tax, penalties and interest. Failure to respond to HMRC’s campaign could mean additional tax being payable.
All is not lost, given that the statutory deadline to make a claim is four years following the end of the tax year of transfer.
However, it is recommended that advice is sought from a tax specialist as soon as possible if you have either received such a letter from HMRC, or if you have made a gift since April 6 2019 with the intention of claiming holdover relief.
The adviser can review the position for you, resolve any questions you have on the original transfer and advise you on the next steps.
Guy Sterling is a tax partner at Moore Kingston Smith
