HM Insights

Second property disposals under review as HMRC prepares to issue nudge letters

HM Revenue & Customs (HMRC) is set to launch a new compliance campaign shortly aimed at those who have disposed of UK residential property and either failed to disclose the disposal, or incorrectly reported the disposal.

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HMRC are expected to send out 14,000 'nudge' letters to individuals it believes made a taxable residential property disposal in the 2018/19 tax year.

What is a nudge letter?

The intention of the nudge letter is to prompt taxpayers to review their tax returns to check whether they need to notify HMRC of any further gains, income or profits which they are yet to disclose.

Receiving a nudge letter does not necessarily mean a previously submitted tax return is incorrect. There may be an innocent explanation as to the error or omission or full disclosure may already have been made.

Who is likely to receive a nudge letter?

HMRC receives details of property disposals through various sources including the UK Land Registry. This data is now being used to write to taxpayers who, HMRC believe, disposed of a property in 2018/19, and have not declared that disposal on their tax return.

The letter will ask taxpayers to either review their capital gains tax (CGT) position for the tax year involved making any necessary amendments, or use the disclosure service to report and pay the correct CGT.

What should I do if I receive a letter?

Individuals should work closely with their tax advisors if they receive a letter. HMRC is carrying out this campaign in order to raise revenue, therefore they will undoubtedly be imposing penalties and interest on any unpaid tax. It is in the taxpayer's best interest to make a full voluntary disclosure to HMRC if they believe they have incorrectly reported their property sale.