HMRC Targets Investors’ Relief Claims with OTM Letters

HMRC is sending One to Many Letters (OTM) to investors and taxpayers who made a claim for Investors’ Relief in their 2022/23 tax returns. The tax authority is sending out two One-to-Many (OTM) letters, one for those who do not qualify for the Investors’ Relief claim and another for those whose information is insufficient to verify their claims.

What are the Conditions for Investors’ Relief Claim?

Investors’ Relief helps to reduce the Capital Gains Tax (CGT) amount when disposing of shares in a trading company. Any individual or trustees of settlements can claim this relief. However, one must note the conditions that qualify for the relief. Here are the conditions that must be met to qualify for Investors’ Relief:

• The shares are ordinary shares in the company
• The company is a trading company or the holding company of a trading group
• You must own the shares for at least 3 years
• The shares were issued to you on or after 17 March 2016
• The disposal of shares was on or after 6 April 2019
• The shares were paid in cash and full when they were issued
• None of the company’s shares were listed on a stock exchange
• You or any person connected with you is not an employee of the company, or of a company connected with it

Investors’ Relief has a lifetime limit of £10,000,000 per person. So, regardless of how many claims a person makes and the number of years of the claim, a person cannot claim Investors’ Relief of more than £10,000,000.

What Investors Should Know About HMRC’s OTM Letters?

HMRC has sent OTM letters to investors as a warning to meet all the conditions before claiming Investors’ Relief. Anyone who receives the OTM letter must amend their Self Assessment Tax Returns for the tax year ending 5 April 2023 to remove your claim for Investors’ Relief. However, if you believe you are eligible for the relief, you need to give HMRC more details such as:

• Name of the company that issued the shares
• Date of acquisition
• Cost of acquisition
• Date of disposal
• Disposal proceeds

The amendment should be made within 30 days of the date of the OTM letter. Amending your Self Assessment Tax Returns can add additional tax amounts. If you do not take any action, a compliance check may be opened against you or your company. HMRC has send similar OTM letters to CIS contractors as well.

Conclusion

HMRC has sent One to Many (OTM) letters to taxpayers claiming Investors’ Relief. Investors’ Relief helps to reduce the amount of Capital Gains Tax (CGT) for people disposing of shares of a trading company. If you believe you are eligible for the relief and meet all the criteria if the relief, you should send additional information to HMRC within 30 days of receiving the OTM letter.