News & Insights

Relief? What Relief? HMRC getting tough on incorporation relief

A recent article on the Chartered Institute for Taxation’s website, highlights the increasing crackdown on schemes involving incorporation relief.  In that regard, whilst the interest in these schemes may (or may not) have been prompted by the much publicised exchange of views between Dan Neidle, Property 118 and Less Tax for Landlords (about which we make and have no comment), HMRC are showing an interest in those individuals, partnerships, or companies claiming Incorporation Relief.

The Chartered Institute for Taxation’s article notes:

HMRC are commencing a One to Many (OTM) letter campaign in November 2023 which will target a small population of taxpayers who have incorporated their property business in the tax year 2017/18 but reported no Capital Gains Tax (CGT) liability on their Self-Assessment Tax return on the basis that incorporation relief under section 162 Taxation of Chargeable Gains Act 1992 applies in full.”

The letter asks the taxpayer to check that they have correctly calculated the incorporation relief available to them, and refers to some specific technical areas that may be relevant with references to HMRC Guidance.  The letter suggests that they may need to seek professional advice…”

HMRC are putting the onus to disclose firmly on the taxpayer:

  • If the taxpayer believes that they need to disclose an error in their tax return, the letter asks them to submit a disclosure to HMRC using a dedicated email address; but
  • If the taxpayer is content with the current status of their tax return, and that no disclosure is required, the letter still asks them to let HMRC know by emailing another dedicated email address provided in the letter

If HMRC do not receive a response within 30 days they will consider the case further and may decide to make a discovery assessment under section 29 Taxes Management Act (TMA) 1970, subject to statutory assessment time limits. They might decide to amend the claim under s9ZB TMA 1970, subject to the legislative criteria and time limit being met.

If you have been advised by an advisor to incorporate your property partnership or property business and as a result of doing so you are now facing a discovery assessment or a significant tax bill, when you were advised to the contrary by that advisor (or any other third party), it may be that you have been poorly advised and have a claim against your advisor or a third party.  If that is the case, we can assist you with that claim.

We have advised numerous clients in relation to claims against their professional advisers and promoters after they engaged in tax avoidance schemes or other tax mitigation schemes/ strategies, including, in addition to incorporation relief, EFRBS, EBT, SHIPS, Contractor Schemes, Film Schemes and Remuneration Trusts including disputes about the loan charge.

We have successfully won significant damages from advisors and/ or promoters where, for example, the advice given was negligent, or a breach of their fiduciary duties, or, there was a breach of statutory duty (e.g. under FSMA).

If you want to discuss matters in greater detail, please contact Tom Maple on 0118 951 6200 or email [email protected].

Disclaimer: this article is not to be relied upon as legal advice. The circumstances of each case differ and legal advice specific to the individual case should always be sought.