Investors’ relief is a capital gains tax (CGT) relief that is available on the disposal of shares where certain conditions are met. If a successful claim is made, CGT is charged on qualifying gains at a reduced rate of 10% for 2024/25 (14% for 2025/26 and 18% for 2026/27), subject to a lifetime limit of £1m (£10m prior to 30 October 2024). Investors’ relief is considered in more detail in an earlier article.
The taxpayer will receive one of two letters depending on their circumstances.
- In the first letter, HMRC asks the taxpayer to check that they meet the conditions for claiming investors’ relief and either:
- amend their return if they find that that their claim is incorrect; or
- contact HMRC using the details given in the letter if they think the claim is valid.
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- In the second letter, HMRC informs the taxpayer that they have not provided enough information in their return about the claim. This means that HMRC cannot accept the claim. The taxpayer should either:
- amend their return and remove the claim if they think it is incorrect; or
- contact HMRC to provide more information about the disposal. The letter sets out the information required by HMRC.
The taxpayer should act within 30 days of the date of the letter otherwise HMRC will consider further action, including amending the return or opening a compliance check.
The letter explains that a penalty may be charged where a tax return contains an error. It is also made clear that any action taken by the taxpayer after receiving the letter will be treated as a prompted disclosure by HMRC for the purpose of calculating penalties.
Take care with investors’ relief
This HMRC campaign is a timely reminder for those yet to submit their tax return for 2024/25 of the need to ensure that all of the conditions are satisfied when making a claim for investors’ relief. Providing information in support of the claim when submitting the tax return may help avoid contact from HMRC at a later date, including the opening of a compliance check. It is clear from this and earlier campaigns that mistakes can be made with regard to investors’ relief.
The letter reminds the taxpayer that the main rates of CGT changed with effect for disposals made on or after 30 October 2024 (although there is an error in HMRC’s letter, as it incorrectly refers to 30 October 2025), and that this may complicate the preparation of the tax return for 2024/25. More details are provided in a separate article, including a link to a helpful calculator from HMRC.
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