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Farming & Rural Business Community

Hobby farmers to be “nudged” by HMRC

Author: David Missen

Published: 13 Apr 2023

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For some time now, HMRC have been sending “nudge” letters to taxpayers and their agents where they have information which might suggest tax has been underpaid. Such letters do not constitute a formal enquiry as such, but are intended to suggest to a taxpayer that something in their Return does not look right or does not tie in with information held elsewhere and may need to be reviewed or corrected.

Previous categories which have come within the nudge regime recently have been landlords, those with overseas income, claimants for Business Asset Disposal Relief and “persons with significant control” of companies whose personal income seems modest.

We have recently been advised of a case where something very similar to a nudge letter has been sent to a wealthy taxpayer whose farming losses have reached the six year limit after which they can no longer be relieved against other income. The letter states “…your Self Assessment or partnership tax returns show losses from the same farming trade for at least five years in a row. If your tax return for the year ended 5 April 2022 also shows a loss...there may be restrictions on tax relief…”.

In some ways this is a helpful reminder, but it also shows that, at least for wealthy taxpayers, HMRC are carefully monitoring the position on an annual basis.

It would be helpful to know whether this is a one-off or part of a wider campaign, and if readers have received similar letters perhaps they could contact the editor at dcmissen@aol.com.

*The views expressed are the author’s and not ICAEW’s.